Insufficient storage means something along the lines of you have too much stuff in your closet to put anything else in there. The phone comes with a couple GB of internal storage. This would be enough for quite a few small apps, a couple thousand pictures, or a few hundred mp3s.
It's not hard to go overboard on something when youre looking at 2GB. If you drop 2 CDs worth of music in there, its half full. If you go crazy one week videotaping everything, you'll fill it up. And if you have one or two apps that go crazy with storing local data (caching maps for the entire western hemisphere or all wikipedia articles starting with the letter a), they'll use up your internal storage in a single swoop.
The fix is either buy a bigger closet, or clean out the one you have. In this case, a bigger closet would be a microSD card (up to 32GB). I got mine off ebay for $15 shipped. As far as cleaning out the the closet you already have, you can connect the phone to a computer in mass storage mode, or use a browser app and find the files taking up all your space, determine that they are safe to delete, and delete them.
Notice that part about not deleting stuff if you dont know what it is. It really doesn't do you any good to save space on your phone by deleting important files. It would be like trying to cut weight by chopping off a leg.
