Yeah, it's part of the 16-bit WoW subsystem in 32 bit versions of Windows (WoW stands for Windows on Windows).
If I remember correctly, ntvdm.exe is the 32 bit "side" of the system (essentially it works by switching the CPU in/out of v86 mode so that 16-bit code can run alongside 32bit code). Wowexec.exe is the 16bit "side" which exposes the OS (system calls and such) to the 16bit apps.
What this means, if you kill off ntvdm.exe, it should terminate ALL your 16bit apps (they all run under a single ntvdm process) that are running.
As an interesting aside, if I remember correctly, this was the reason that 16 bit apps can't be run under 64 bit windows (I don't think you can switch from long mode to v86 mode).
In any case, good fix -- I wonder if it works in all cases of this error message appearing.