There are several valid arguments to pose this question. In Alien, the crew of the Nostromo found the ship by homing in on its beacon. The colonist obviously didn't pick up that signal, or they would have found it. Why didn't they pick up the signal? Many people regard this as a plothole, but this is not necessarily the case. There are actually several possibilities conceivable.
1) There is an extra-source explanation: About two months before the movie Alien was released, Heavy Metal released a graphic novel version of the movie which contained many scenes later cut from the original, but restored in the "Director's Cut" version of the movie. In the graphic novel, when Dallas, Kane, and Lambert enter the Derelict Ship and discover the giant "Space Jockey," Dallas twists a knob near the base of the giant's chair and turns off the signal.
2) A possible explanation which writer/director James Cameron himself has offered in a Q&A session in a 1986 issue of the magazine Starlog: as seen in an extended scene with the Derelict Ship in Aliens: Special Edition, the ship is visibly damaged by volcanic activity; a lava flow has crushed the ship against a rock outcropping, ripping open its hull (Newt's parents enter through this hole). This damage has apparently silenced the signal. It would be, however, quite coincidental for this to happen precisely in the 30 years or so between the discovery of the ship by the Nostromo crew and the arrival of the colonist at LV-426, but it's nevertheless possible.
3) The signal stopped broadcasting as soon as the Nostromo's crew entered the ship (as seen in Alien). This is unlikely, as the signal was most likely meant as a warning to other visitors not to come any closer. There would be no sense in programming it to deactivate it and thereby risking more visitors to come over and investigate. ***In the original shooting script for Alien it is switched off by Dallas during the search of the ship***
4) The signal stopped out of old age. This is more likely, as the Space Jockey (the Derelict Ship's pilot as seen in Alien) is fossilized and therefore dead for several thousands of years. It is logical to assume the signal has been active for that same amount of time. Every abandoned piece of machinery, no matter how sophisticated, will stop working at some point because of wearing and tearing, and absence of maintenance. Again, this relies heavily on the coincidence that this happened right between the two manned visits to LV-426.
5) The signal was missed because of random factors. LV-426 is located in a outlying, uninhabited system (outside 'the Outer Rim'), and is probably not frequently traversed. There could be disruptive interference from other planets, moons, nebulae, etc (several large planets/moons/gas giants are seen surrounding LV-426 as the Nostromo approaches it in Alien). The signal could also have weakened over the millennia (see 3). So the chances of picking up the signal would therefore be quite slim; it could have been a matter of unhappy coincidence that the signal was clear enough and the Nostromo close enough to pick it up (although there are reasons to believe the Nostromo was secretly sent close by LV-426 on Company orders, in order to pick up the signal; see the FAQ of Alien). An additional factor is that the Nostromo was going to Earth; that might have been the optimal flightpath to pick up the signal. The colonist were most likely coming from Earth, approaching the planet from the other side, so perhaps the transmission was blocked by the large ringed gas giant behind LV-426, visible in Alien. After the initial approach, the colonist established the colony far away from the ship so that the planets curvature effectively blocked the ship's transmission. And as soon as the atmosphere was created, the ship's computers may have started to corrode and degenerate at an increased pace, thereby nullifying the signal. [[Just a note - LV-426 always had an atmosphere; otherwise there would have been no storm during Alien when they were on the planet. What the processor was doing was making the existing atmosphere breathable. However, the original supposition is correct; the increase in oxygen levels could definitely have contributed to the transmitter corroding.]]
6) The colonists may not have been expecting signals that far out in space, and weren't looking for them or actively avoided them. Perhaps the ship's computer wasn't even set to check for them. Keep in mind that, according to Ash in Alien, "every systematized transmission indicating a possible intelligent origin must be investigated, on penalty of total forfeiture of shares". Sounds like a good argument to just stop listening for transmissions; you can't investigate a signal you never heard. Plausibal deniability guaranteed. Or, the first colonists were perhaps not subjected to the Company's compulsory investigation rule. Remember that the Company only co-financed the colony, so the first settlers might not have been Company workers.
7) The company could have picked up the signal and could have relayed it to the Nostromo without telling them. So after the Nostromo crew went missing, they decided to cover up the incident and maybe somehow blocked the signal so other ships wouldn't pick up on it.
8) The Company deliberately witheld the knowledge of the possible threat from the colonists quite obviously, so a cover-up seems most likely.
9) Or quite simply, the signal is to warn people away from it, so everyone stays away from it. Therefore nobody knows what's there. If they know of the signal as a warning and stay away from it, Newt's father decided to go take a look, and not specifying where he was headed to the company officials, expecting them to figure he won't find anything so he will get full percentage for the claim, they don't know he was headed towards the signal. Which would also explain his reluctance to call in his discovery until they had gone to take a look inside.
10) #8 does not jibe with the extended version, in which one of the "manager-types" at LV-426 is talking to another about how they received a request from Earth to check out the grid reference, and he'd sent the Jordens there to check it out. This fits with Ripley's later discovery that Burke told the colonists to investigate the ship. The most likely explanation is #1 or #3. At the time of Alien, the signal was detectable some distance out in space; it stands to reason that if the signal was still broadcasting, the survey teams investigating the planet for colonization some 30 years later would have detected it.
So assuming that no one after the Nostromo crew was able to pick up the distress signal, how come the colonist didn't find it by blind luck during surveillance missions?
1) Assuming that the colonists never picked up the signal for whatever reason(s), it seems logical that they surveyed the planet's surface from orbit to pick the best spot to build the colony. Wouldn't the ship have turned up on a mineral scan or topographical scan of the planet? Perhaps, but consider that the ship's configuration is quite organic, and its colour doesn't stand out that much from the planet's surface. It has also been weather-worn for ages, and covered with sand and lava flows. From above, it might not be clearly discernable, or at least be mistaken for a strangely shaped rock (of which there are enough on the surface). Neither do we know anything about what it's made of; perhaps it is made from unknown minerals, alloys or highly advanced polymers that wouldn't show up on our sensors.
2) According to Van Leuwen (the head of the board of inquiry that demotes Ripley), there have been people over 20 years on LV-426, and it takes decades to make the air on a colony breathable. It seems plausible that the colonist spend most of their first 20 years inside where there is air to breathe, building their colony complex and atmosphere processor, and raising their families. They have probably spent only a couple of years surveying the planet surface at the beginning of Aliens. And even so, with LV-426 being approx. 1200 km in diameter (according to the Director's Cut of Alien), there is over 4,5 million square kilometer of surface to cover. By comparison: that is half the area of the United States (9,2 million sq km). Considering the surface of LV-426 being rocky and inhospitable, it is easy to assume that the colonists hadn't surveyed the entire planet yet with only 70 people in 20 years, even with the benefit of tractors.
3) The ship is probably not too close to the colony complex, in an area that has not been surveyed previously. In the Special Edition of Aliens, Lydecker describes the area as "past the Ilium range, in the middle of nowhere". The area hasn't even been named yet, so it's probably unknown territory.
4) Even if some of the colonists had been in the ship's vicinity before, they could still have missed it easily. The ship is surrounded by mountains, and the atmosphere processors have caused the air on LV-426 to become denser and misty. Remember that Newt's dad had to drive past a mountain before the ship became visible, and even then the mist covered most of it. You could be standing a mile away from the ship and still not see it, if you didn't know what to look for.