this error means you are not able to connect to web service mainly..it could be one of the following
1. either your network proxy restricts you or (make sure proxy is not blocking this request)
2. crm web server does not authorize your or (make sure yoy got correct username/domain/password)
3. your not connect to this web server (run -> cmd (command prompt) and tyep Ping and web server name)
Hope this helps..