LinearLayout, RelativeLayout, etc. margins do not work as expected

The problem is actually the way FrameLayout interprets margins. setContentView() attaches your "main" layout to a FrameLayout, which is the actual root of the view hierarchy (you can see that with Hierarchy Viewer) and is offered to you by the phone.

Margins are managed by the parent layout, so in this case that main FrameLayout. I don't know if it's a feature or a bug, but that's how this layout interprets margins.

So well, the solution was already posted while I was typing: use padding instead.

if you need set margin for a layout, simply wrap it with another linear or relative layout

<LinearLayout xmlns:android="http://schemas.android.com/apk/res/android"
  android:layout_width="fill_parent"
  android:layout_height="fill_parent">

  <LinearLayout android:layout_margin="40dip"
    android:layout_width="match_parent"
    android:layout_height="match_parent">

    <Button android:id="@+id/button"
      android:layout_width="match_parent"
      android:layout_height="match_parent"
      android:text="I'm a button" />

  </LinearLayout>

</LinearLayout>

android:padding="40dp" on the LinearLayout or android:layout_margin="40dp" on the Button will give you the effect you want. Padding defines the space between a views edges and its content, layout margin defines extra space on the sides of a view.