Problems logging on to Yahoo from Pidgin?

You're not the only one.

The Pidgin folks have a lengthy and detailed technical explanation as to why the client borked. In a nutshell, it had something to do with the change in Yahoo's authentication system.

To wit:

Yahoo began upgrading their servers at some point recently to phase out the old Yahoo Messenger 6 client. In effect, they want to force users of older software to update to the current client. Whether this is a good thing or not depends on your perspective. From Yahoo's point of view, I'm sure this is an excellent move, as it should make their server software simpler (speak one less protocol, one less auth scheme, etc.) and reduce their support load (fewer client versions to deal with). Where it became a problem for us is that at the same time, they started requiring protocol version 15 clients to speak the version 15 authentication scheme, which we never implemented. Since we still spoke version 13's authentication, this cut us off entirely.

Furthermore:

Yahoo began upgrading their servers at some point recently to phase out the old Yahoo Messenger 6 client. In effect, they want to force users of older software to update to the current client. Whether this is a good thing or not depends on your perspective. From Yahoo's point of view, I'm sure this is an excellent move, as it should make their server software simpler (speak one less protocol, one less auth scheme, etc.) and reduce their support load (fewer client versions to deal with). Where it became a problem for us is that at the same time, they started requiring protocol version 15 clients to speak the version 15 authentication scheme, which we never implemented. Since we still spoke version 13's authentication, this cut us off entirely.

Now, an upgrade to Pidgin 2.5.8 ought to solve this problem, as per the Pidgin folks. However, stock Ubuntu users, even those on Jaunty, are currently stuck on 2.5.5 as the latest version has not been packaged as yet.

The new release should be coming Real Soon Now, but in the meantime, you may have to content yourself with using the Yahoo web messenger or Meebo.