The SIM card is a fairly new addition to the iPhone where as each incarnation had entirely unique storage previously, even though it is not the actual storage method The purpose of a SIM card is to actually keep your identity and contacts between phones so that when you upgrade or get a new model you can take them from one device to another. Now you can employ the SIM card with the iPhone in a few specific ways, and the most important thing you are going to need to know is how you can actually take those contacts and get them onto the new iPhone. Here is a quick look at how to import contacts from a SIM card.
The difference between the iPhone and other phones that use a SIM card is it still does not use the SIM card to store its information, but you can still get the contacts from the SIM card into your phone. Take the SIM card from your old phone and start by looking it over to make sure that it is compatible with the iPhone. You will then want to sync your iPhone with iTunes so that you can back it up. Go into Settings and turn off iMessage, which is in the Message section. Next you will want to completely clear the iPhone of content, since you will be importing it from the SIM card. Go into Settings and then down to General, which is the top of the third block of options. Head directly to the bottom and hit the Reset button, and in this menu choose Erase All Content and Settings. Now you will be able to remove the SIM card from the iPhone. If you are on the standard CDMA network then you may want to actually call in and suspend your cell phone service during this process.
Put in the new SIM card and then plug in your iPhone to your computer so that it can sync to iTunes. This is really only done if it looks like you need to go through the iPhone activation process again. Go back into Settings and then down to Mail, Contacts, Calendars, which is below iCloud and above Twitter. Go down to the Contacts heading and below the Order options you will find a button for Import SIM Contacts, which you will select. Once it has finished you can take out this old SIM card and put back the one that came with the iPhone. Keep in mind that this may have some problems if you are on a CDMA network since it may indicate that you are using a foreign SIM card and you should talk to your service provider.