Have you already upgraded your iPhone 4S from iOS 5 to iOS 5.0.1? If yes then you must be experiencing a new bug or problem in your Messages App which doesn’t show you the contact’s name while receiving a text message even though it is saved in your contact’s list. This contact bug issue has been initially reported by Paul Hontz on The Startup Foundry website then number of similar bug complaints are being observed from iPhone 4S users.
From Paul Hontz:
I updated my iPhone 4S earlier today (using the OTA method), and I discovered a nasty bug. My iPhone could no longer remember the names of any of my contacts! I opened up the contacts app on my phone and discovered that all of entries were still there but if I got a text or a call my iPhone would have a sudden bout of amnesia and forget the contacts name.
Moreover, the contact bug on Messages app is only observed on Verizon Wireless network with an iPhone 4S running recently released iOS 5.0.1 Over The Air (OTA) update. There are no such news reported from iPhone 4S users on Spring or AT&T network. There is a small procedure shared by Paul Hontz through which he is been able to resolve this issue successfully.
How to Fix
1- Dail *228 on your iPhone 4S which is basically recognized as Verizon programming number.
2- Press “1” to “Program or Activate” your iPhone 4S.
3- After some time your call will be disconnected and a message will appear saying “Settings updated”.
4- Open task manager by double clicking on your iPhone 4S Home Button.
5- Close your Phone, Message and Contacts Apps.
6- Wait 4-5 minutes and then open your iPhone 4S Message App to verify fix
Hopefully by following above mentioned procedure you will be able to resolve this problem. If not then even you can try closing Message App again and restart your phone.