It can come up while installing anything really. I'm not sure exactly which versions of pip are affected, I know I had 1.5.6 and it was affected.
These examples are grabbed from my system level Python, but of course you should use a virtualenv.
Running setup.py install for simplegeneric
Traceback (most recent call last):
File "<string>", line 1, in <module>
File "/Library/Python/2.7/site-packages/setuptools/__init__.py", line 12, in <module>
import setuptools.version