Trying to Download IOS Update via ITunes

Hi.....I have an IPhone 4. Im not able to download the most recent IOS7.0.6 update via wireless and am trying to update via ITunes.Phone is plugged in to PC.  I have verified that I have the latest version of ITunes. However, when I go to file-devices,  Backup is greyed out and the only option is "Restore from Backup". What am I doing wrong??

FORCE IPAD INTO RECOVERY MODE
1. Turn off iPad
2. Turn on computer and launch iTunes (make sure you have the latest version of iTune)
3. Plug USB cable into computer's USB port
4. Hold Home button down and plug the other end of cable into docking port.
DO NOT RELEASE BUTTON until you see picture of iTunes and plug
5. Release Home button.
ON COMPUTER
6. iTunes has detected iPad in recovery mode. You must restore this iPad before it can be used with iTunes.
7. Select "Restore iPad"...
Note:
1. Data will be lost if you do not have backup
2. You must follow step 1 to step 4 VERY CLOSELY.
3. Repeat the process if necessary.

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