If you are attempting restore and have multiple copies of the backup file, try using a different copy. If you have other restore points, try an older full backup or an incremental associated with an older full. If you are unable to recover the complete VM, file level recovery may still be possible.
If the error is encountered during backup, try running an active full backup. This will bypass the need to read data from previous backup files.
The Windows event log on the repository server may contain Disk Event 7: “The device… has a bad block.” If so, run CHKDSK /F or /R. A small number of bad blocks are normal on most storage devices. If additional bad block events occur after running CHKDSK, check the SMART status and consider replacing the disk. If using a Network Attached Storage device, contact your storage vendor to determine what diagnostics are available.