How big of storage space did you get with your iphone? How much space have you used/filled?
Delete applications, transfer pictures or music from the device basically whatever you need to do to make room for additional data.
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You have to be more specific about what you do have on there....for example, if you have any movies on there then it won't take much to fill it up. A single movie can take up well over 1 GB (Sherlock Holmes is 1.79 GB). Videos you recorded using your iPhone can take up significant space depending on the length. You can try a restore to see if that helps if you truly know for a fact that the data you have saved on your device is not taking up a lot of the space. You can look in settings and look at the "About" menu to see how much of certain things you have (# of videos, movies, pictures, etc). If you do have a lot of high space items on your iPhone then you will need to delete something to clear some space. If you purchased it from iTunes you will be able to redownload purchased items if you want to add them back. You should also have those items backed up...via iCloud or a computer/harddrive.