The only thing that I could do is reinstall SkyDrive and choose the existing SkyDrive folder.
I saw the same error on my laptop... but I am not sure what happened why the error suddenly appeared. But I think something got corrupted... same as what happened to my PC. Bottom line is that SkyDrive is too sensitive and any unwanted interruption
can simply corrupt something and stops SkyDrive from working. I hate reinstalling SkyDrive over and over again and going through the entire long process of "Processing Changes" and etc. I'm not seeing this issue on my Google Drive. Probably this is what I
get for choosing the cheaper SkyDrive alternative.
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