In order to use vpsupd.exe, you must always use the latest version of the program.
Now, the latest version of the program is 4.7.1043 (but it seems you’re using version 4.7.1001).
Please update to the latest version by downloading its setup package and running it on the machine in question (this will work if the machine is not connected to the Internet, which I suppose is the case here as you’re using vpsupd.exe to update the virus database).
Initially when I ran the setup of avast I used to see the icon in the system tray, however there had been some problems with my PC and then now it doesnt show up in the system tray. However I can run the program from Start–>Programs menu and it does the scanning.
However I noticed that there is some virus sitting in my machine and hence thought of giving it a through scan. So I first went to get the updates and thats where I noticed this error.
Probably that virus broke avast installation. I recommend to reinstall it completely.
Download uninstall utility here: http://www.avast.com/eng/avast-uninstall-utility.html
Run it to uninstall avast, then restart Windows and install avast again.