For Wordpress Notifier to work XML-RPC needs to be enabled. This tutorial shows you how to do this in Wordpress 2.7.
Login into the Admin Dashboard and click on the "Settings" menu item.

Now click on the "Writing" menu item.

Under the heading "Remote Publishing" make sure that the "XML-RPC" tickbox is checked.

Scroll down the page and click the "Save Changes" button.

Well done! XML-RPC is now enabled and your blog now can interface with Wordpress Notifier.