The version in the manifest file does not correspond with the current version of SharePoint Portal Server
If you are trying to restore a complete portal backup from one setup to another, you may receive this error. So, what version of SharePoint are you running? Regular SPS 03 deployment, or SP1 or 2 applied?
1. On the server, go to 'Add or Remove Programs'
2. For SPS and/or WSS, click 'Click Here for Support Information'. Note the version numbers below:
Standard Installation:
Windows SharePoint Service: 11.0.5608.0
SharePoint Portal Server: 11.0.5704.0
With Service Pack 1:
Windows SharePoint Service: 11.0.6361.0
SharePoint Portal Server: 11.0.6715.0
Ensure that the server you are restoring to is the same as the one you backed up. This is also covered in detail in the Microsoft Windows SharePoint Services from MS Press, by Jim Buyens - pp. 442-443.
Hopefully someone will find this helpful before struggling for hours to resolve it the hard way :)