Apple’s Servers Choking On iPhone OS 3.0 Downloads
Not surprisingly, Apple’s servers seem to be getting hit pretty hard. Several users are telling us that they are getting errors from iTunes after trying to update saying “The iPhone [your iPhone] cannot be updated at this time because the iPhone activation server is temporarily unavailable. Please try again later.” We saw basically the same situation at the iPhone 3G launch.
The obvious conclusion is that there are so many people downloading and activating iPhone OS 3.0 that Apple’s servers just can’t handle it. So what should you do if it happens to you? First: stop freaking out. Put on some relaxing music and go get some snacks, and then try again in a few hours.
You might also want to take a look at the Apple support article for the error to see if any of these steps fix the problem.