Mercurial gives this error for the hgrc (Mercurial configuration file) when the user running a Mercurial command is not the same as the owner of hgrc. This typically happens on servers, shares or distributed filesystems.
To fix this, add a trusted section to the configuration file to tell Mercurial to trust the user or group reported in the error.
For example, if Mercurial complains that it does not trust joe and you happen to trust him, add him to hgrc:
[trusted] users = joe
Tried with: Mercurial 2.0.2 and Ubuntu 12.04.1 LTS