iphone 4 activation problem

Are you using a supported carrier on the phone? Is the phone jailbroken or hacked in the past to use a different carrier. The update has probably locked the phone back to the original carrier it was locked to, thus the error.

You can try this support document for SIM troubleshooting and see if it works, but the error you show is generally for locked phones. http://support.apple.com/kb/TS4148

Who unlocked the phone?

gautamshrivasava wrote:

Hey thanx but my iphone is unlocked and i used almost all carrier of india but after restoring i am facing that problem.

That is strong evidence that it was not legitimately unlocked. It was hacked to illegally unlock it. You can't get help here for a hacked phone.

Who unlocked the phone is the question that needs answering right now. Your problem sounds like the phone was not unlocked officially by the original carrier. If the phone was hacked to unlock it you will end up having the problem you describe.

Contract free is NOT the same as unlocked. The phone is not unlocked.

Call AppleCare and give them the serial number. They can tell you who it's locked to. The reason you were able to use it previously is because it was hacked to unlock it. Updating / restoring the phone has caused it to re-lock to the original carrier.

ONLY the carrier it's locked to can authorize unlocking it.