I've seen many posts about this error but in my case the password is being typed correctly but is always rejected on the first attempt, saying Your PC is offline. Please sign in with the last password.
I know Windows tries to authenticate Live accounts with their servers, but it's massively annoying having to enter the same password twice just because it can't try the same password locally before failing.
Does anyone have a solution for this?
EDIT: For clarification, this is only at login, not unlock.
At some point in the last two days this has stopped occurring. Hopefully it was just a network issue during startup and won't happen again!