This means that you do not have permission to relay email.
This can result from either failure to authenticate - you have not turned on SMTP Authentication.
If this is received in a bounced message, then it means that you tried to send an email to the
server for a domain that doesn't exist on the server - this can result from misconfigured MX entries.

To resolve the issue you have to turn on the SMTP Authentication on your e-mail client.

Please refer to:

http://drundo.info/index.php?_m=knowledgebase&_a=viewarticle&kbarticleid=110&nav=0,1,4