I am working on the exact same feature!

Here is my code:

    public class ImageEditActivity extends Activity {

        public String reportDate;


        @Override
        protected void onCreate(Bundle savedInstanceState) {
            super.onCreate(savedInstanceState);

            setContentView(R.layout.image_edit_activity);

            Intent intent = getIntent();
            reportDate = intent.getStringExtra("reportDate");


            int w=getWindowManager().getDefaultDisplay().getWidth()-25;
            int h=getWindowManager().getDefaultDisplay().getHeight()-25;

            BallView ballView=new BallView(this,w,h, reportDate);
            setContentView(ballView);
        }
    }


    class BallView extends SurfaceView implements SurfaceHolder.Callback {
        private Bitmap bitmap ;
        private int x=20,y=20;int width,height;
        String reportDate1;

        public BallView(Context context,int w,int h, String reportDate) {
            super(context);

            reportDate1 = reportDate;
            width=w;
            height=h;
            getHolder().addCallback(this);
            setFocusable(true);
        }

        protected void onDraw(Canvas canvas) {
            super.onDraw(canvas);

            String path = Environment.getExternalStorageDirectory().getAbsolutePath() + "/VibrationMeasurement/" + reportDate1 + ".machine" + ".jpg";  

            Bitmap bitmap2 = BitmapFactory.decodeFile(path);

            Bitmap scaled = Bitmap.createScaledBitmap(bitmap2, width, height, true);


            bitmap = BitmapFactory.decodeResource(getResources(), R.drawable.crosshair);

           // canvas.drawColor(Color.BLUE);//To make background 
            canvas.drawBitmap(scaled,0,0,null);
            canvas.drawBitmap(bitmap,x-(bitmap.getWidth()/2),y-(bitmap.getHeight()/2),null);

     //       canvas.drawBitmap(;
        }

        @Override
        public boolean onTouchEvent(MotionEvent event) {
            x=(int)event.getX();
            y=(int)event.getY();

            if(x<25)
                x=25;
            if(x> width)   
                x=width;
            if(y <25)
                y=25;
            if(y > height)
                y=height;



            updateCrosshair();

            return true;
        }

        @Override
        public void surfaceChanged(SurfaceHolder holder, int format, int width,int height) {
            // TODO Auto-generated method stub
        }

        @Override
        public void surfaceCreated(SurfaceHolder holder) {
            // TODO Auto-generated method stub
        }

        @Override
        public void surfaceDestroyed(SurfaceHolder holder) {
            // TODO Auto-generated method stub
        }

        private void updateCrosshair() {
            Canvas canvas = null;
            try {
                canvas = getHolder().lockCanvas(null);
                synchronized (getHolder()) {
                    this.onDraw(canvas);
                }
            }
            finally {
                if (canvas != null) {
                    getHolder().unlockCanvasAndPost(canvas);
                }
            }


        }
    }

Where I am unsure on how to continue is on how to merge this with a layout.xml file.

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Don't make your SurfaceView extends Activity--you should extends SurfaceView, NOT Activity!

The logcat messages show that you are trying to create a class extends Activity, but you didnt provide default constructor(constructor with no arguments). So the Android framework cannot create your activity!.

You should modify your SurfaceholderActivity class and extends SurfaceView instead of Activity. Possibly Modify AndroidManifest.xml if you have add SurfaceHolderAcitivty in activity tag.

Try to modify your code like this:

public class SurfaceHolderActivity extends SurfaceView implements Callback {

    private SurfaceHolder mySerfaceHolder;

    public SurfaceHolderActivity(Context context) {
        super(context);
        this.mySerfaceHolder = this.getHolder();
        this.mySerfaceHolder.addCallback(this);     
    }

    @Override
    public void surfaceChanged(SurfaceHolder holder, int format, int width, int height) {
        // TODO some implementation...
    }

    @Override
    public void surfaceCreated(SurfaceHolder holder) {
        // TODO some implementation...
    }

    @Override
    public void surfaceDestroyed(SurfaceHolder holder) {
        // TODO some implementation...
    }
}

And I suggest you to rename SurfaceHolderActivity as MySurfaceView since it should be a View but not an Activity.

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This answer is 99% plagiarized from a Commonsware tutorial/code sample. I added a button that switches between front and back camera.

PreviewDemo.java

package com.commonsware.android.camera;

import java.io.IOException;

import android.annotation.SuppressLint;
import android.app.Activity;
import android.hardware.Camera;
import android.os.Bundle;
import android.util.Log;
import android.view.SurfaceHolder;
import android.view.SurfaceView;
import android.view.View;
import android.widget.Toast;

public class PreviewDemo extends Activity {

    private static final String TAG = PreviewDemo.class.getSimpleName();
    private SurfaceView preview = null;
    private SurfaceHolder previewHolder = null;
    private Camera camera = null;
    private boolean inPreview = false;
    private boolean cameraConfigured = false;
    int cameraID = 0;

    @Override
    public void onCreate(Bundle savedInstanceState) {
        super.onCreate(savedInstanceState);

        setContentView(R.layout.main);

        preview = (SurfaceView) findViewById(R.id.preview);
        previewHolder = preview.getHolder();
        previewHolder.addCallback(surfaceCallback);
        previewHolder.setType(SurfaceHolder.SURFACE_TYPE_PUSH_BUFFERS);
    }

    @SuppressLint("NewApi")
    @Override
    public void onResume() {
        super.onResume();

        // camera = Camera.open();
        camera = Camera.open(cameraID);
        startPreview();
    }

    @Override
    public void onPause() {
        if (inPreview) {
            camera.stopPreview();
        }

        camera.release();
        camera = null;
        inPreview = false;

        super.onPause();
    }

    private Camera.Size getBestPreviewSize(int width, int height, Camera.Parameters parameters) {
        Camera.Size result = null;

        for (Camera.Size size : parameters.getSupportedPreviewSizes()) {
            if (size.width <= width && size.height <= height) {
                if (result == null) {
                    result = size;
                } else {
                    int resultArea = result.width * result.height;
                    int newArea = size.width * size.height;

                    if (newArea > resultArea) {
                        result = size;
                    }
                }
            }
        }

        return (result);
    }

    private void initPreview(int width, int height) {
        if (camera != null && previewHolder.getSurface() != null) {
            try {
                camera.setPreviewDisplay(previewHolder);
            } catch (Throwable t) {
                Log.e("PreviewDemo-surfaceCallback", "Exception in setPreviewDisplay()", t);
                Toast.makeText(PreviewDemo.this, t.getMessage(), Toast.LENGTH_LONG).show();
            }

            if (!cameraConfigured) {
                Camera.Parameters parameters = camera.getParameters();
                Camera.Size size = getBestPreviewSize(width, height, parameters);

                if (size != null) {
                    parameters.setPreviewSize(size.width, size.height);
                    camera.setParameters(parameters);
                    cameraConfigured = true;
                }
            }
        }
    }

    private void startPreview() {
        Log.d(TAG, "start preview called");
        if (cameraConfigured && camera != null) {
            Log.d(TAG, "stuff works");
            camera.startPreview();
            inPreview = true;
        }
    }

    SurfaceHolder.Callback surfaceCallback = new SurfaceHolder.Callback() {
        public void surfaceCreated(SurfaceHolder holder) {
            // no-op -- wait until surfaceChanged()
        }

        public void surfaceChanged(SurfaceHolder holder, int format, int width, int height) {
            initPreview(width, height);
            startPreview();
        }

        public void surfaceDestroyed(SurfaceHolder holder) {
            // no-op
        }
    };

    @SuppressLint("NewApi")
    public void switchCamera(View view) {
        Log.d(TAG, "switch called");
        if (inPreview) {
            camera.stopPreview();
        }
        camera.release();

        cameraID = (cameraID + 1) % 2;
        camera = Camera.open(cameraID);
        try {
            camera.setPreviewDisplay(previewHolder);
        } catch (IOException e) {
            e.printStackTrace();
        }
        camera.startPreview();
    }
}

main.xml

<?xml version="1.0" encoding="utf-8"?>
<RelativeLayout xmlns:android="http://schemas.android.com/apk/res/android"
    android:layout_width="fill_parent"
    android:layout_height="fill_parent" >

    <android.view.SurfaceView
        android:id="@+id/preview"
        android:layout_width="match_parent"
        android:layout_height="match_parent" >
    </android.view.SurfaceView>

    <Button
        android:layout_width="fill_parent"
        android:layout_height="wrap_content"
        android:text="switch"
        android:layout_alignParentBottom="true"
        android:onClick="switchCamera" />

</RelativeLayout>

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Thanks for everyone for helping.. but I got workaround for this.

in onCreate method of activity i updated following code:

 public class MainScreenActivity extends Activity 
{
private static final String TAG = "Recorder";
public static SurfaceView mSurfaceView;
public static SurfaceHolder mSurfaceHolder;
public static Camera mCamera ;
public static boolean mPreviewRunning;
public static SharedPreferences sharedPref;
public static Display display;
public static  int swidth,sheight;

@Override
public void onCreate(Bundle savedInstanceState)
{
    // Requires import android.view.Window
    requestWindowFeature(Window.FEATURE_NO_TITLE);

    super.onCreate(savedInstanceState);
    setContentView(R.layout.mainscreen_layout);




    mSurfaceView = (SurfaceView) findViewById(R.id.surfaceView2);
    mSurfaceHolder = mSurfaceView.getHolder();



            /*************added code*************/      
    display = getWindowManager().getDefaultDisplay();

    @SuppressWarnings("deprecation")
     int width = display.getWidth(); // ((display.getWidth()*20)/100)
    @SuppressWarnings("deprecation")
     int height = display.getHeight();// ((display.getHeight()*30)/100)

    swidth = width;// width*10/100;
    sheight = height*5/100;//height*15/100;
    TableRow.LayoutParams lp = new TableRow.LayoutParams(swidth,sheight);
    lp.span=3;
    lp.column=0;
    lp.weight=0.05f;
    mSurfaceView.setLayoutParams(lp);
            /*************added code*************/
           . . . .
      }
    .  . . . 
  }

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Here couple of suggestions.

1. Do this heavy camera work Camera.open() on onResume() method of Activity/Fragment
2. It seems that you are not checking if camera is currently available. You can not count on that everytime you request camera it will be ready to serve you.
3. This may relate to not proper initialization of camera instance.

Here is my sample code seems to be working on and using suggestions above. Check especially surface method seems like you are mixing surface method jobs.

public class NewItemCameraFragment extends Fragment{

    private static final String TAG_STRING = NewItemCameraFragment.class.toString();

    private Camera mCamera;
    private SurfaceView mSurfaceView;
    private Button mTakeButton;
    private FrameLayout mProgressLayout;


    @Override
    public View onCreateView(LayoutInflater inflater, ViewGroup container,
            Bundle savedInstanceState) {

        View view = inflater.inflate(R.layout.fragment_item_camera, null, false);

        mProgressLayout = (FrameLayout) view.findViewById(R.id.item_camera_progress);
        mProgressLayout.setVisibility(View.INVISIBLE);

        mTakeButton = (Button) view.findViewById(R.id.item_camera_button);
        mTakeButton.setOnClickListener(new OnClickListener() {

            @Override
            public void onClick(View v) {

                if (mCamera != null) {
                    mCamera.takePicture(mShutterCallback, null, mPictureCallback);
                }

            }
        });

        mSurfaceView = (SurfaceView) view.findViewById(R.id.item_camera_surfaceview);
        SurfaceHolder holder = mSurfaceView.getHolder();
        holder.setType(SurfaceHolder.SURFACE_TYPE_PUSH_BUFFERS);
        holder.addCallback(new Callback() {

            @Override
            public void surfaceDestroyed(SurfaceHolder holder) {
                // TODO Auto-generated method stub
                if (mCamera != null) {
                    mCamera.stopPreview();
                }
            }

            @Override
            public void surfaceCreated(SurfaceHolder holder) {
                // TODO Auto-generated method stub
                if (mCamera != null) {
                    try {
                        mCamera.setPreviewDisplay(holder);
                        mCamera.setDisplayOrientation(90);
                    } catch (IOException e) {
                        // TODO Auto-generated catch block
                        Log.d(TAG_STRING, "Error setting up preview display " + e);
                    }
                }
            }

            @Override
            public void surfaceChanged(SurfaceHolder holder, int format, int width,
                    int height) {

                if (mCamera == null) return;

                Camera.Parameters parameters = mCamera.getParameters();
                Size s = getBestSupportedSize(parameters.getSupportedPreviewSizes(), width, height);
                parameters.setPreviewSize(s.width, s.height);
                s = getBestSupportedSize(parameters.getSupportedPreviewSizes(), width, height);
                parameters.setPictureSize(s.width, s.height);
                mCamera.setParameters(parameters);

                try {
                    mCamera.startPreview();
                } catch (Exception e) {
                    Log.d(TAG_STRING, "Could not start the preview " + e);
                    mCamera.release();
                    mCamera = null;
                }

            }
        });

        return view;
    }

    private Camera.ShutterCallback mShutterCallback = new ShutterCallback() {

        @Override
        public void onShutter() {
            mProgressLayout.setVisibility(View.VISIBLE);
        }
    };


    private Camera.PictureCallback mPictureCallback = new PictureCallback() {

        @Override
        public void onPictureTaken(byte[] data, Camera camera) {
            String filename = UUID.randomUUID().toString() + ".jpg";
            FileOutputStream fos = null;
            boolean success = true;

            try {
                fos = getActivity().openFileOutput(filename, Context.MODE_PRIVATE);
                fos.write(data);
            } catch (Exception e) {
                Log.d(TAG_STRING, "Error writing to file " + e);
            } finally {
                try {
                    if (fos != null)  fos.close();
                } catch (IOException e) {
                    e.printStackTrace();
                    success = false;
                }
            }

            if (success) { Log.i(TAG_STRING, "File saved at " + filename); }
            getActivity().finish();
        }
    };

    private Size getBestSupportedSize(List<Size> sizes, int width, int height) {
        Size bestSize = sizes.get(0);
        int largestArea = bestSize.width * bestSize.height;

        for (Size size : sizes) {
            int area = size.width * size.height;
            if (largestArea < area) {
                bestSize = size;
                largestArea = area;
            }
        }

        return bestSize;
    }


    @Override
    public void onResume() {
        super.onResume();
        mCamera = Camera.open();
    }


    @Override
    public void onPause() {
        super.onPause();
        if (mCamera != null) {
            mCamera.release();
            mCamera = null;
        }
    }
}

Updated with layout to clear things out.

<?xml version="1.0" encoding="utf-8"?>
<FrameLayout xmlns:android="http://schemas.android.com/apk/res/android"
  android:layout_width="match_parent"
  android:layout_height="match_parent" >

<LinearLayout 
    android:layout_height="match_parent"
    android:layout_width="match_parent"
    android:orientation="vertical">

    <SurfaceView 
        android:id="@+id/item_camera_surfaceview"
        android:layout_height="match_parent"
        android:layout_width="match_parent"
        android:layout_weight="1"/>

    <Button 
        android:id="@+id/item_camera_button"
        android:layout_height="wrap_content"
        android:layout_width="match_parent"
        android:text="@string/item_camera_button_text"/>

</LinearLayout>

<FrameLayout 
    android:id="@+id/item_camera_progress"
    android:layout_width="match_parent"
    android:layout_height="match_parent"
    android:clickable="true">

    <ProgressBar 
        style="@android:style/Widget.ProgressBar.Large"
        android:layout_height="wrap_content"
        android:layout_width="wrap_content"
        android:layout_gravity="center"/>

</FrameLayout>

</FrameLayout>

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