What it is
This is one of those rare errors that appears one every third or fourth blue moon or so and makes you go "uh, oh." What is happening (behind the scenes) is that the computer is able to talk to the modem (the modem is dialling if you recieve this message), and is able to get to the remote server. At this point, the modem should send a signal to dialler informing it that it's connected. This isn't happening. Either the modem doesn't think it's connected, or the modem is no longer talking to the dialler for some reason (such as FAX extensions conflicting with the PPP.