its saying my sim card is not compatible?

It certainly should be unlocked then. If you haven't done so already, try the usual steps: restart, reset, restore.

http://support.apple.com/kb/HT1430

http://support.apple.com/kb/HT1414

If that doesn't help, then even though the SIM works in another phone, I'd still suggest getting another SIM from your carrier and trying that (and confirm that the carrier you wish to use does support the iPhone). If you still have problems after that, call Apple Support or take your iPhone to an Apple Store.

Regards.

If you're getting that message, it sounds as if the phone is not actually unlocked. However, it may also be a bad SIM card. Try taking it out and reseating it. Try getting a new one from your carrier.

In what country and specifically from where did you buy your iPhone?