Have you looked in /var/log/apache2/error.log to see if there are more details?
Are both the .htaccess and .htpasswd files in locations that the "www-data" user can read? Do they have proper permissions to allow that user to read them? Make sure that all references to files are absolute ones with full paths (see below).
It's never a good idea to move text files directly from Windows to *nix machines because they differ in how they designate the end of lines. Install the package tofrodos and apply it to the files to strip any extraneous line terminators. In the future use a text editor on the local machine like gedit or kate, or command-line tools like nano or emacs.
Notice the full path to the password file, called .htpasswd here. Also, for security purposes, the file should not be kept in the same directory as the web site files. You can place it anywhere in the system as long as the www-data user can read it.
AuthName "Friends Only!"