The 1.0.3 updater is only for very old (Mac OS X v10.3.7-10.3.9) external iSights.
It CANNOT be related to your built-in iSight's problem.
If restarting Mac does not fix your trouble, use all relevant suggestions from http://support.apple.com/kb/HT2090 to find your problem. Then you will know what to fix.
For example, the SMC "reset" suggested there sometimes restores normal function.
If not, be sure to test more than one Apple app in more than one user account and check your System Profiler utility to see if your Mac recognizes your iSight as a USB hardware device.
If the problem remains, use Disk Utility to repair permissions. Then download and apply the OS X Lion Update 10.7.5 (Client Combo). Repair permissions AGAIN immediately following the restart that complete update installation.
If you need to post back fo more ideas, please tell us WHICH MacBook Air you have. Also tell us which Apple apps you tested in multiple user accounts, which ones (if any) worked, and which did not.