You're on a proxy server which requires authentication. Please note that we're currently unable to support this type of proxy.
This is the error Google Gears displays because I'm behind a corporate firewall [that requires authentication, naturally]. Considering that it must be trivial for Google to provide this functionality out of the box, its absence is puzzling.
Fiddler2 does it out-of-the-box but then it's not an IE plug-in. Nikhil's WebDevelopmentHelper does it [it's an IE plug-in] but may not be a "man-in-the-middle". It may just be listening in on the conversation between IE & the proxy.
So, today, for local storage, you could use:
- Adobe's Flash & Dojo
- Google Gears [may be Beta 2 would support authenticating proxies]
- Microsoft Silverlight 1.1 [supports only 1 MB of local storage]
Hello Microsoft, [knock... knock] are you guys listening? Here's your chance for one-up-man-ship. By providing local storage and every other thing everybody has been asking for in Silverlight, you could still be ahead of Google [Gears]!. [Aside: Hey, let's not panic, YouOS is no reason for us to not improve IE, right? :) ]