Why do the keyboard brightness keys sometimes stop working?

This is actually quite a clever little battery saver Apple have built into the MacBook. There is an ambient light sensor next to the iSight camera on the unibody models or on both sides of the keyboard, under the speaker holes, on older models. If the MacBook determines that the light in the room/outside is too bright for the keyboard backlight to be of any use, it will turn the backlighting off. Then you can see that overlay to indicate that you don't have control of the brightness because the macbook has disabled it.

You can test this by putting the keyboard brightness up to full brightness and then shining a light/torch at the area around the iSight camera (or speaker holes) and you'll see that you cannot control the keyboard brightness while the light is shining.

Once you turn the light off, the keyboard brightness controls will function again.