My guess is when the PDF file was created it contained a signature field. When Reader finds a signature field it makes the assumption that the document author intended for a digital signature (a certificate based, cryptographic operation) to be created and not an electronic signature (which is what a image based signature is without any underlying crypto). Thus, the electronic signature options are disable on the dialog you're referencing. Try recreating the file without the signature field, but rather just draw a line and type "Sign here" underneath the line (or something to that effect).
I hope this helps,
Thanks for you reply. This is a great option however if I leave it without a field I'm concerned that people won't know how to sign in. Is there a way to have a field that prompts user to insert a electronic signature? For example with the digital signature you click it and it prompts you to insert the digital signature, without this it is possible to just not sign it...
Now I'm trying to place a signature in Adobe Reader and it requests that I save a copy and I do but It won't let me place a signature even after a saved copy. Ever time I try to place a signature it requests that I save and it and no signature.... a thus a vicious cycle of saving and no signture! I'm really loosing my mind over this. Any help please?