This error is caused on iPhone 3Gs when you are trying to flash an iPhone with a firmware that iTunes has close its signature. That is when 4.0.1 is out you cant downgrade an iPhone to 4.0. it will make error 3194.
Now we had SAURIK server. This sever is able to store a SHSH file for a particular firmware say v4.0, and when there is other version will be available say 4.0.1, you will be able to downgrade it to 4.0.
Now look for a search how to save SHSH and how to get connected on server saurik.