I would guess that you're running on Vista because that is the only OS I've seen that error on. The low level sound system was re-written for Vista which hasn't been done since Windows 98 (if I remember correctly) and I have found several issues with sound drivers running on Vista. One of which is a random occurance of the error you are seeing: FMOD, the sound library we use, simply reports that your machine doesn't have a recording device. There's nothing the software can do about that - a bug in Vista/the device driver simply causes it not to work.
I added that error message after running into this exact problem on a machine I was developing on. I later read about the Vista sound system re-write and (just trying things out) installed after-market sound drivers from Reltek. After installing those drivers, I never saw that error again. A co-worker of mine has also seen that error and he theorized that the cause was his USB headset which are known to have some problems especially on Vista.