There are several things that could cause the VSS to fail when creating a snapshot. The main problem could be permissions. The user that is executing the backup must have administrator's or backup privileges to use VSS.
Then the volume that you are trying to snapshot must be supported by the system: It must be a NTFS volume (not FAT or FAT32), local (not on a remote machine) and native (not a TrueCrypt volume or some other emulated volume)
Check also to see if the VSC requester is running as a service. If not, try starting it manually. If it fails, check if .NET 3.5 is installed and running.