If I were you, I would so two things immediately. Change your iTunes password, and call Apple to see if your account/ID has been flagged or suspended for some reason (ie suspicious activity, but some vendors won't always say that's the reason flat out bc of contracts they have with places like Visa. My own bank couldn't give me details when something similar happened to me.
If you have MobileMe or FindMyIphone/iPad, try logging into either site from a computer & see if it'll accept it.
Could be fraud (sadly common in the past year w/iTunes in particular) or could be the app store or could be something weird with just your ID. I would definitely call them though. They will talk to you about something like this, and if you have AppleCare use that as a way to jump through their phone queue faster. Hope this helps.
Also did you maybe set a numeric password by accident in settings to lock out app purchases? Might be worth checking there too.
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