Arduino dumilanove cannot read while writing?

Projects Programming
4 
int analogPin = 3;     // potentiometer wiper (middle terminal) connected to analog pin 3
                     
int val = 0;           // variable to store the value read

void setup()
{
  Serial.begin(9600); //  setup serial
  pinMode(3,OUTPUT);  
}

void loop()
{
  val = analogRead(analogPin);    // read the input pin
  Serial.println(val);      // debug value
  
  if (val>500){analogWrite(3,128);} 
}//i simplfied the code

Moderator edit: I added code tags.