Security programs interact with your system on a fundamental level, and if you have more than one anti-virus program installed at the same time it can cause problems -- such as preventing you from updating one or both of them.
Alternatively, your firewall might be incorrectly marking AVG updates as potential security threats and preventing them from coming through.
If you are having difficulties with your Web connection, contact your Internet service provider for assistance.
If malware has taken root on your system, it may try and prevent AVG Anti Virus from updating itself in order to remain undetected.
To remove it, download and install an on-demand scanner that requires no installation and won't interfere with your existing AVG package: Microsoft Safety Scanner and Trend Micro House Call are all reliable free options that you can consider.
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I've installed AVG Anti-virus Free on two computers and I'm using Windows 7 on both.