Several people that uses Pidgin (mostly Linux users) are complaining that they couldn't logged in to their Yahoo account. It's NOT Pidgin's fault, but due to recent notifications from Yahoo that they are planning to retire old version of their IM client application on August. Some servers has been upgraded with new authentication method which current Pidgin (2.5.6) hasn't implemented yet.
So, what's the solution?
Simple. Just follow this link and you will find the suitable solution. I have tested it and it's confirmed to work