Hidden - This is the best approach for actions that are never available to the current user. There is no point in having the user waste mental effort figuring out why something is disabled if there is no action they can take to change this.
Disabled - This is the best approach for actions that are sometimes available, but not at the moment or in the current context. A disabled option should convey two things: first, the action is not available right now, and second, there is something the user could do to make the action available (change some setting or permission, select an item, enter prerequisite data, etc.). If you can indicate what needs to be done to enable the action in a tooltip - all the better. Enabling/disabling actions as the user enters data or changes context provides excellent feedback about what the program requires.
Fail with an Error - This is the worst choice. You should only resort to an error report for operations that might work: you can't tell that it will fail except by trying.
