First, try taking out the batteries, and holding the power button for about 10 seconds. Then put the batteries back in and try again.

If the error message returns it is usually one of two things, an issue with the lens motor/gears, or with the lens cover shutters. Since your model has a separate lens cap, it is probably the lens motor/gears.

You can try blowing some canned air in the gap around the extended lens to see if it blows loose some sand or crud from the gears. You can also try cleaning out what you can around that gap with a small paintbrush or even just running a piece of paper inside the rim. If that doesn't work, it's time for surgery...

If you are mechanically inclined you can try to take the camera apart and look at the gears.

If not, you can try to force the lens back into place. Keep in mind while this strategy may work, and has worked for me once in the past, course there is a change you will further damage your camera. It's probably not worth the cost to repair anyway at its age, so it might be worth a try if it is otherwise headed for the trash. Turn the camera on, and look at the lens head on. If you see that the gap around the lens is bigger on one side, the lens might have gotten bumped out of alignment. Power the camera on, and while the lens is extended pop out the batteries so the lens stays extended. You can try sticking a small flat screwdriver or similar in the gap on the tighter side, and pry gently. If you don't have anything handy that fits, or if this attempt doesn't work, you can try pushing the lens back into place.

Last resort- only do this if the lens glass does not extend past the front bezel of the lens (or if you have an appropriate surface like a rubber pad to prevent damage to your lens). Push the rim of lens in with some force on the side where the gap is bigger. Don't push on the glass. If it won't move and you need more force, place the camera pointing face down with the lens flat on a table or other flat surface. Stand directly over the camera, hold it with both hands a give it a quick shove STRAIGHT down (not all your weight, but a good shove).

If all options fail, it is probably time for a new camera.

Good luck!