In order to download free apps from the iTunes app store, you need a valid iTunes account. However, when trying to create an account in iTunes, it requires you to have a valid credit card.
Fix
On your iPhone/iPod/iPad:
- Log out of the app store (Settings > Store > Click on Apple ID > Sign Out
- Open the App Store
- Download and install a free application
- Select "Create a New Apple ID from the popup
- After entering personal details, creating a password and agreeing to the terms and conditions, select "None" as your payment option (see image)
Information and images provided by Apple support at http://support.apple.com/kb/ht2534
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