Con (case insensitive) is the name of the console device. That's not an Easter egg, nor a bug, it's by design. The error is a bit ambiguous though. Windows is trying to prevent you from creating a directory with the same name as a reserved word for a device. I don't run Windows Vista, but you should get the same error if you try to call a new directory "prn" (printer on LPT1).
You can use devices in a command prompt or MS-DOS window to redirect input/output to various different things as though they were files. For instance:
C:\>copy con myfile.txt
will create a new file or overwrite an existing one with what you type on-screen. (CTRL+Z terminates, by the way). And the command:
C:\>type myfile.txt > prn
Will print it.
The other "Easter egg" isn't even part of Windows.
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