Well, it means just what it says. It's either an invalid ip address or an invalid API key.
Since is_ip only checks the format of the IP and not connectivity to it, and your fomat is valid, one can only assume your API key is not. :)
Go into your admin panel -> settings -> api and create an API key for that IP address.
What are you trying to do, local piping or remote piping? If you're doing remote piping, then you need to add the API key that you just generated to the automail.php script (you'll see it in there when you open it up to be edited).
If you're doing local piping, then congratulations, you've found an obscure bug... or, well, not so much a bug as an oddity of configurations. In which case, a work-around is described here: http://osticket.com/forums/showpost.php?p=11707&postcount=6(http://osticket.com/forums/showpost.php?p=11707&postcount=6)
