Pagination problem moving to next page of blog posts

I have a pagination problem with my blog posts.

The theme is set for 10 posts on the page. When you hit next it says it is on page 2 but repeats the same 10 posts from the first page.

Can anyone tell me please how this can be fixed?

This is my index page

<?php get_header();?>
<div id="main">
	<div id="content">
	    <?php if (have_posts()) : while (have_posts()) : the_post(); ?>
			<div class="post" id="post-<?php the_ID(); ?>">
				<p class="postmeta"><em><?php the_author_posts_link() ?> on <?php the_time('M jS Y') ?> <?php edit_post_link(__('Edit This')); ?></em><?php the_category(',') ?></p>
				<h2 class="title"><a href="<?php the_permalink() ?>" rel="bookmark"><?php the_title(); ?></a></h2>
				  <div class="entry">
					    <?php the_content(__('Continue Reading »')); ?>
			        <?php wp_link_pages(); ?>
              <p class="post-tags">
                <?php if (function_exists('the_tags')) the_tags('Tags: ', ', ', '<br />'); ?>
              </p>
		      </div>
		      <p class="posted"><span class="comments"><?php comments_popup_link(__('No responses yet'), __('One response so far'), __('% responses so far')); ?></span></p>
	     </div>
	     <?php endwhile; else: ?>
         <p><?php _e('Sorry, no posts matched your criteria.'); ?></p>
		 <?php endif; ?>
      <p align="center"><?php posts_nav_link(' - ','« Prev','Next »') ?></p>
	</div>
  <?php get_sidebar();?>
  <?php get_footer();?>