I do not know whether Outook, in this case 2007 running under Vista Home Premium, is the cause of this message. Email has worked, but now displays a Enter Network Password pop up. I would like to know whether this is a Microsoft Windows issue or one due to the email host's server?
Usually, when this happens, is because the connection to the server failed. Depending on the type of account or connector there are several actions: 1) If the connetcor is an Outlook Hotmail Connector, is known that the very first connection to the server after a large period of inactivity can result in a message like you are experiencing, and also a Sync error would appear.
2) If the connector is an IMAP or POP, you can access to the account and verify the settings using the Test Account Settings. There is also the oportunity to verify all the other parameters to connect to the server (or servers), specially if the sender server is distinct than the receiver, and should have the same or distinc credentials.
3) An intermittent netwok problem or a very slow connection can also relay in the same behavior.