If you are running your wordpress hosting on Windows server at that time you may face this issue. When you change your Permalinks from one value to another, on save changes it will ask you to change your web.config file. don’t be confused. specifically you will face this problem while hosting with godaddy or znetlive server.
Just add web.config file manually in your wordpress folder with following content.
<?xml version=”1.0″?>
<configuration>
<system.webServer>
<rewrite>
<rules>
<rule name=”Main Rule” stopProcessing=”true”>
<match url=”.*” />
<conditions logicalGrouping=”MatchAll”>
<add input=”{REQUEST_FILENAME}” matchType=”IsFile” negate=”true” />
<add input=”{REQUEST_FILENAME}” matchType=”IsDirectory” negate=”true” />
</conditions>
<action type=”Rewrite” url=”index.php” />
</rule>
</rules>
</rewrite>
</system.webServer>
</configuration>
Courtesy : http://wordpress.org/support/profile/jclark32
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