Hi there,
Thanks for buying the app and apologies that you're having issues!
The app's product description on the App Store now explains this issue (it has done for a couple of days now...), but thanks for contacting me directly rather than simply leaving a 1-star review
Based on feedback from other users, the most common cause of that message appearing is users using an email address rather than their O2 username when logging in - or - users with multiple contracts assigned to their O2 online account: your login details are correct though (otherwise you would have been asked to enter them again).
The new version (1.1) fixes both of these issues (and all of the others that have been reported) and also adds a couple of new features; the update was sent off to Apple for approval on Monday and it'll be available as a free update in the App Store within a week (Apple manually approve all app updates). You can leave your O2 online account as it is: the update will allow you to select a mobile number to use if you do have multiple contracts assigned to one account.
In rare cases, users discovered that they'd already had an O2 online account from the time they bought their iPhone and so created a new one without realising, which doesn't work: O2 currently has an issue which lets users have multiple online accounts assigned to the same iPhone contract. You can tell if your account is setup correctly as you should see the following when you login via the O2 website:
http://screencast.com/t/cutxk1Dtrk
You'll need to give O2 customer services a call from your iPhone on the number 2302 (for free) if you see this when logging in:
http://screencast.com/t/j29h20ctF
Version 1.1 should work flawlessly for all users (including you), but - if for some crazy reason it doesn't - like I said, just drop me another email and I'll get the problem sorted.l