You will get this error message when you are trying to commit changes you made to your working copy. Normally this happens, because somebody else has changed the same file(s) in the repository as you have.
That means you need to use the Update command to update your working copy to the same level as the repository.
It may not be obvious why you need to do this, especially if you know the repository has not changed. The answer is simply that your working copy is not completely updated by a commit. Only changed files and folders get updated automatically. Consider this example on a newly created repository:
Add Folder in revision 1
Add File1 and File2 in revision 2
Modify File1 and commit in revision 3
Now the repository is at revision 3, but in your working copy the revisions look like this:
Folder : revision 1
Folder/File1 : revision 3
Folder/File2 : revision 2
Now if you modify File2 and try to commit, it fails. The client tells the repository that File2 is at revision 2 with local modifications, but the repository is already at revision 3. If you then do an update, File2 will be at revision 3 as well (and of course your local changes will still be there).
The same thing may happen if you try to create a branch or tag. The answer is always the same:
If your working copy is out-of-date, update it!