I had an interesting (and annoying altogether) issue today, and thought I would share the solution as it may hopefully help someone else. Also, as this kinda relates to the first Windows Phone 7 birthday, I figure it is likely to happen to many other developers in the next coming days.
Facts: I was trying to sideload a custom app to my device, but I kept getting the above error code. Not sure why I didn’t get the actual error message instead, but a quick google search revealed that my device was in a “developer locked” state.
Well, no problem: just open the phone unlock tool included in the SDK and that will fix it. Right? Not at all: while the tool told me it had correctly unlocked my device, I got the same error in Visual Studio.
So I logged in to App Hub to check that my registration was active and healthy, and that’s when I found out that my “unlock registration” had just expired on that particular device. Apparently the phone unlock tool doesn’t renew it on its own, so (finally!) the solution is to remove the device on App Hub and run the unlock process afterwards. And that WILL fix it.