I haven't run into this error before, but what I can find in forums is that this is actually a Windows error and not a QTP error. There are some slight differences in what people have suggested, but the consensus seems to be that there is a problem with the C++ runtime libraries either being corrupted or some other similar problem:

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The application has failed to start because its side-by-side configuration is incorrect.

[Cause]
This is a Windows issue. It can due to several reasons. In some cases it is because Microsoft Visual C++ libraries have become corrupted.

[Resolution]
1. Please try to download and install C++ 2008 SP1 Redistributable Package.
*Microsoft Visual C++ 2008 SP1 Redistributable Package (x86):
http://www.microsoft.com/download/en/details.aspx?id=5582

*Microsoft Visual C++ 2008 SP1 Redistributable Package (x64):
http://www.microsoft.com/download/en/details.aspx?id=2092

2. Reboot your computer.

3. Test.

Visual C++2008 Download links:

For x86:

http://www.microsoft.com/downloads/en/details.aspx?familyid=A5C84275-3B97-4AB7-A40D-3802B2AF5FC2&displaylang=en

For x64:

http://www.microsoft.com/downloads/en/details.aspx?familyid=BA9257CA-337F-4B40-8C14-157CFDFFEE4E&displaylang=enMicrosoft

Sources:
http://answers.microsoft.com/en-us/windows/forum/windows_7-pictures/error-the-application-has-failed-to-start-because/df019c0d-746e-42d0-ad68-465e18e3f3ef

http://support.microsoft.com/kb/2525435