This is what steampowered.com has to say on the subject:
Important Note
If the Steam Network is down or too busy you may not be able to connect to a Game Server - to determine whether or not this may be the issue, please check the Steam Status Page - if the last update for that page is more than 20 or 30 minutes behind, there may be a Steam network outage.
Please check to see if there are other players having the same problem on the SteamPowered Forums.
If it does appear as though the Steam network is down, you will need to be patient and wait until the problem gets cleared.
Some users have reported encountering this message after their Steam account has been hijacked or stolen by another user (this message may display if another user has logged in while you are in a game. If you have confirmed the message is not the result of a network outage and your password is rejected when you attempt to log in, please proceed to the Reclaiming a Hijacked Steam Account topic for instructions.
If your password is not rejected upon logging in again and you are still receiving this error message, the issue is most likely being caused by not restarting Steam after a Steam update has been released.
If restarting Steam does not resolve the issue, please exit Steam and delete the following files:
Steam.dll
SteamUI.dll
ClientRegistry.Blob
These will be found under your Steam installation directory - by default, this will be C:\Program Files\Valve\Steam\ (this may vary if you specified a different installation folder, or if you have moved your Steam installation).