I have no idea why this happens. I have not been able to fix the underlying issue, but .. do you have photoshop open?
It turns out photoshop interrupts the alt+number keys globally, so even if you have putty open, changing windows with alt+<number key> won’t work. Closing photoshop makes everything work again.
After having a few issues with UTF-8 support in Emacs earlier (I .. well .. err .. use emacs as my .. mail editor.), I finally found a solution that works with both putty and gterm as my terminals.
The important settings I ended up using in my .emacs:
(setq x-select-request-type '(UTF8_STRING COMPOUND_TEXT TEXT STRING))
Archived for my own use at a later time.
After making the move to UTF-8 for all applications in my daily routine a couple of weeks ago, putty was the last client to cause any sort of problem. I logged into my home server to read E-mail today, and putty apparently got everything mixed up as it tried parsing the UTF-8 encoded text as ISO-8859-1.
There is however a quick and easy solution in the more recent versions of putty (.. only a couple of years old?):
Menu -> Change Settings -> Window -> Translation -> Received data assumbed to be in character set
Set that value to UTF-8, and everything will be A-OK!