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Error Message when checking names: Name does not resolve and following error displayed:

Using People Picker displays this error:

In Event Log you will see the error below.

If you look events that occurred just before the event 8307 An exception occurred in All Users claim provider when calling SPClaimProvider.FillHierarchy() you will notice few Alternate Access Mapping Errors (event id: 8059). They seems to be irrelevant but that’s exactly the cause. You are missing AAM mapping that user is using to access the site where name resolution was attempted. There might be million other reasons for error you chasing but try this first and make sure you have AAM configured. Note, batteries not included and reboot or IIS reset not required for AAM updated to take effect

Log Name:      Application
Source:        Microsoft-SharePoint Products-SharePoint Foundation
Date:          1/29/2011 7:33:36 PM
Event ID:      8307
Task Category: Claims Authentication
Level:         Error
Keywords:      
User:          Domain\loginID
Computer:      serverName.domain.com
Description: An exception occurred in All Users claim provider when calling SPClaimProvider.FillHierarchy(): Object reference not set to an instance of an object..

Event Xml:
<Event xmlns="http://schemas.microsoft.com/win/2004/08/events/event">
  <System>
    <Provider Name="Microsoft-SharePoint Products-SharePoint Foundation" Guid="{6FB7E0CD-52E7-47DD-997A-241563931FC2}" />
    <EventID>8307</EventID>
    <Version>14</Version>
    <Level>2</Level>
    <Task>47</Task>
    <Opcode>0</Opcode>
    <Keywords>0x4000000000000000</Keywords>
    <TimeCreated SystemTime="2011-01-30T00:33:36.620650000Z" />
    <EventRecordID>51361</EventRecordID>
    <Correlation ActivityID="{C8CF965E-3F41-490C-9D96-75EA8F84BE3E}" />
    <Execution ProcessID="3076" ThreadID="4888" />
    <Channel>Application</Channel>
    <Computer><serverName.domain.com></Computer>
    <Security UserID="<SID of the user who experienced the error>" />
  </System>
<EventData>
    <Data Name="string0">All Users</Data>
    <Data Name="string1">SPClaimProvider.FillHierarchy()</Data>
    <Data Name="string2">Object reference not set to an instance of an object.</Data>
</EventData>
</Event>