I assume the red warning window isn't a good thing
It's not. You're not able to update :'(
but it doesn't give me a clue as to what to do about it.
Basically, check:
1) If the servers.def file is corrupt or 0KB (C:\Program Files\Alwil Software\Avast4\Setup\servers.def).
You can try and download the servers.def file,
http://files.avast.com/iavs4x/servers.def and replace the one in the avast setup folder.
2) If your subscription allows the update right now (i.e., if it is not expired).
3) If your firewall settings and allow
avast.setup to connect.
If you're not sure, just turn off your firewall (to be sure the update failure is not due to it).
Maybe you should 'remove' avast.setup entry, try to update, receiving a new alert from the firewall, allowing it and checking it to remember.
4) Check your proxy settings into avast!:
Left click the avast icon > Settings
Update (Basic) > Details > Proxy
Make sure your browser is not set to "Work Offline" (this option is generally in the File menu).
If it doesn't help, try switching from "Auto-detect" to "No proxy" (I'm assuming you're not connecting to the Internet via proxy).
You can run
proxycfg -d in a DOS window to make your computer connect direct, without proxy. You can run
proxycfg -h for help.
Are you suggesting it's OK to simply ignore the problem?
For sure not... you need to update...