I recieved this error while trying to import a site to one farm that I had moved from another farm.
First, I got an error saying there is not enough space on the disk. The site collection quota was too low for the site import. Though the alert was a bit misleading about where to lack or space was coming from, at least it stops the import and the very beginning instead of waiting until the quota was met.
After that, I got more confusing error messages: "FatalError: Failed to read package file. " and "Failure writing to target file at Microsoft.SharePoint.Library.SPRequest.ExtractFilesFromCabinet"
The reason that this is confusing is that it leads you to believe that the backup file is corrupt. However, it was because I was low on disc space on the server. The backup file was 800mb and there was just under 1000mb left on the C drive of the computer. In theory this shouldn't make a difference, because 1) there is still 200mb of available space and 2) you're not writing another copy of these files to the C drive of these computers, so that 1000mb of space is not affected.
Resolution: I moved the file to a file share and the STSADM import ran.