Two primary cell phone technologies exist today: GSM and CDMA. The former uses removable, plastic SIM cards to store your device's data and exchange signal with cell phone towers. When you insert a carrier's SIM card into your phone, it becomes linked with that carrier's network -- in most cases, that is.
How SIM Cards Work
One way to think of a SIM card is as a tiny, paper-thin computer chip you insert into your GSM cell phone; it's necessary for its function. Without a SIM card, a GSM phone is effectively worthless -- the card provides digital information that allows the phone to connect to a certain mobile network. In most cases, inserting a carrier's SIM card into your phone results in immediate recognition of and connection to its network.
Although GSM technology affords cell phone users inherent flexibility and freedom to choose from among different carriers, cell phone vendors and manufacturers have, in some cases, bypassed this. If you buy a phone direct from a provider in the United States, for example, it comes "locked" -- or programmed -- to that carrier's network. Unless you have "unlocked" the phone -- in other words, taken it to a repair specialist who reprograms it -- inserting a different carrier's SIM card into it will have no effect.
For a SIM card to work in a cell phone, it must be activated with its carrier. The procedure for activation varies depending on your carrier, but it usually involves contacting the carrier to establish a new line of service, which may or may not involve making a preliminary payment. As such, if you find a SIM card on the ground or borrow one from a friend, it's likely that it doesn't have a line of service established. If you insert a SIM card into your phone, it will not recognise the SIM.
Defective Cell Phone
If you have unlocked your cell phone and you know for a fact your SIM card corresponds to an active line of service, there could simply be a problem with your cell phone itself. Like any electronic device, cell phones -- and SIM readers -- can wear out. It's possible that, for any number of reasons, your cell phone is no longer capable of reading new SIM cards. If you've ruled out other possibilities, take your phone itself to a repair specialist and get his professional opinion.