I've been getting "Display driver stopped responding but has recovered" errors for a while now with my 560 Ti FPB (Fermi) , but they only happen when I'm running Firefox and not in any strenuous games. When it happens my screen blacks out for a second and then pops back with the error.
 
I'm aware there are a number of unrelated issues that can all cause the same error and have done a full wipe and reinstall of various drivers (full releases of 280.xx and beta 285.xx - I'm currently on the beta 285.38), killed the old Nvidia HD audio, uninstalled Realtek audio, set the Nvidia control settings to single display/max performance, etc. I've been systematically checking my hardware and not finding it related to the RAM, power supply, or CPU so far.
 
A couple points that may give some direction as to what's causing the error:
- It only happens while browsing the internet (Firefox or other browsers occasionally during testing) but not in any 3D app
- It doesn't appear terribly consistent (not directly related to flash or adobe or simply having tons of tabs)
- It often seems to occur early after I start surfing the internet after a fresh boot. Interestingly, I can turn the comp on 30 seconds before browsing or an hour before hopping online, and it doesn't seem to make a difference.
- Based on all of this and what I've read elsewhere, I'm wondering if there's a bad 2d display profile that's underclocking or causing hiccups as it throttles up? I've disabled hardware acceleration in Firefox, but obviously the card is still responsible for rendering everything - a couple other users elsewhere with AMD cards had almost identical issues and was able to solve it by editing the 2d display profile so it wasn't in an excessively low 'power saving' profile, although I haven't found any similar options with Nvidia.
 
Any assistance or input is appreciated.

If I recall correctly, this problem is solved by updating adobe flash. Don't remember where I read it though, so I could be mistaken. Give that a shot and report back.

It's definitely not a power supply issue: My new rig has an Enermax MaxRevo 1350W for a currently non-oc'ed i7 2600K with a GTX 460 and a few hard drives.
 
Edit: I thought it was gone, but still getting the same error in Firefox, even after installing the new version of Adobe Flash.

Here's my update:
1) upgraded to FireFox 7.1, latest Flash 10 and even tried the Flash 11 RC - I still got the driver stopped responding error message.
2) Tried 285.38 and still got the error message.
 
However, I think I have a bad GTX 560 Ti. I've been playing LotRO for years, and just this week the game started to crash, usually right after a battle and I'm looting a corpse.  It would happen within 5 mins of just exploring and fighting.  If I clock down to 800-822 core / 2000 mem, then I can go about 15-20 min before the LotRO client crashes.  I've also tried various drivers, even back to the 275.33 that was rock solid for me.
 
I've swapped to the old Radeon HD 5770 and LotRO no longer crashes.  I guess I'll be RMA'ing the board back to evga.
 
 

I just upgraded to the BETA drivers so I could play BF3 (285.38) and this exact error happened when my girlfriend was browsing on my computer. Both screens went black and nvidia alert message popped up saying that it recovered my driver settings and it was fine. I was browsing in Firefox as well.
 

Same here, on firefox only

 I get this with ie9 and the beta driver's and never had it happen during a game of BF3. Only when using the internet.Black Screen and message saying Nvidia Display driver stopped and has recovered.

Same issue here with Firefox 7 and only on firefox; no issues gaming in SWTOR beta or BF3....

darkman-t

Now faced this same problem on FF 7.0.1
using drivers 285.62

Any way to solve this?

 
Yeah use Google Chrome! 

I had the exact same issue with my 560 ti FPB. Just switch to Google Chrome instead. It doesn't crash. It's not a hardware problem so don't worry about it. Google chrome is better anyway.

try going into FF settings and turn off hardware acceleration.
 
Seems to reduce the number of crashes