On July 15, 2014, Google turned off Basic Authentication for all users and now requires all mail clients to use oAuth 2.0. Outlook and other desktop email clients do not currently support entering the pin codes required by oAuth 2.0 and must use special app passwords instead.
With Basic Authentication turned off, users who are not not using two-step verification will be unable to connect to Gmail servers using Outlook, Thunderbird, and other email clients.
You may receive the following message when Outlook attempts to log into your account:
An email is generated when an email clients attempts to log on and is blocked.
You may receive the following send and receive error message:
Task 'Synchronizing subscribed folders for email@example.com.' reported error (0x800CCC0E) : 'Outlook cannot synchronize subscribed folders for firstname.lastname@example.org. Error: Cannot connect to the server. If you continue to receive this message, contact your server administrator or Internet service provider (ISP).'
If you are using two-step verification, you do not need to enable basic authentication; accounts with two-step enabled require an application-specific password for access using applications, such as Outlook, that do not ask for the pin code.
You have two choices: enable two step verification and use app passwords in clients that don’t support pin codes or turn basic auth back on. Two step verification is more secure and is highly recommended.
To turn Basic Authentication back on, go to Gmail account settings and choose Allow less secure apps.
If you aren't using two-step verification, you can enable it in Settings. You'll need to create an app password to use instead of your normal Gmail password.
Enable two step verification video tutorial
For more information, see Google's “Password incorrect” error page
Outlook cannot connect to Gmail after July 15, 2014 (MSKB)
New Security Measures Will Affect Older (non-OAuth 2.0) Applications