I tried many of the helpful and thoughtful suggestions here, but this one was the culprit for me (running 10.2). As soon as I moved them out of a group, Erase worked. Thanks for the troubleshooting! I've had this problem with clip, joins, and selections when performing geoprocessing in the Python Command Window. Everything runs fine in ArcGIS 10.0, so this is definitely a 10.1 bug. It occurred before and after installing SP1 for Desktop Background Geoprocessing (64-bit). The error occurs on shapefiles and feature classes (GDB). I can run some commands referencing a layer and have it work fine, close ArcMap, open later to run the same commands and receive the error...Sometimes the error would appear for a different layer that didn't give me a problem before. Nothing change in the TOC or with the layers. FRUSTRATING... My workaround...Every time I received the error I was referencing a grouped layer. Being grouped didn't cause the problem, as it occasionally worked with the same grouped layer, but errors only occurred on a grouped layers. If I moved the layer outside of the group the errors always went away. I've tried several ways to reference the layer (e.g. r'GROUP\lyr', 'GROUP\lyr', 'lyr) but could not find a solution. As someone else mentioned, sometimes restarting ArcMap helps too.
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