This occurs in several situations all of which are related to the key being incorrect.
If you are attempting to use an extension that wasn't part of your license when the key was generated then you'll need to regenerate the key. Application keys are only valid for the keys that you had access to when the key is created.
Make sure the application ID that you use to generate the key exactly matches the one in your application descriptor. Note that some IDE's append '.debug' to the end of the debugging application id and you may need to account for this.
If you were a customer before make sure you are not using your old developer key. These will not work in the new extensions, you have to generate an application key.
Things to do:
regenerate the key making sure that the application id matches exactly
check that the extension you are using is in the list of extensions that the key will be valid for (at the bottom of the create key form)
check that you are copying the key in it's entirety and that there are no spaces or carriage returns