There was a failure while initializing the Microsoft Visual SourceSafe source control provider

I kept getting this error when I was trying to open my project. 

There was a failure while initializing the Microsoft Visual SourceSafe source control provider. You cannot use this provider to perform source control operations.

Here is the solution:

1. Open VS2005, go to menu Tools -> Options, then click "Source Control"

2. Choose "None" for the drop-down list under "Current souce control plug-in", rather then "Microsoft Visual Source Safe"

Reference: 

http://social.msdn.microsoft.com/Forums/en-US/vssourcecontrol/thread/255dfa57-87ab-4db5-ab9b-b79a0c6dc1b7

Cheers!