There are a few reasons you might receive this error message. First, make sure you’re using the "No proxies" connection setting.
To select this setting:
Click Messenger and select Preferences.
Click Connection.
Select the "No proxies" option.
Click OK at the bottom of the window.
Close Yahoo! Messenger completely and start the program again. This should eliminate the error message.
If you’re still unable to connect using the "No proxies" option, you might not have the ability to use the webcam feature.
Your firewall must permit outgoing TCP connections on port 5100. Make the following changes to your firewall:
Protocol: TCP
Server: webcam.yahoo.com
Port: 5100
Most Internet service providers (ISPs) don't have firewalls or proxies, but you should contact your network administrator or ISP for accurate information.
Note: You might be running XP's built-in Internet Connection Firewall (ICF) without your knowledge.