Another cause is - Playwright extension is not able to find node.exe executable

Fix - Add path to node.exe to windows PATH windows environment variable

1. Windows menu -> Settings -> Search "Edit environment variables for your account"
2. There for PATH edit and add path to node.exe
3. Open a windows command shell and confirm the path is in "PATH" environment variable

echo %PATH%

4. Now relaunch vscode and in playwright panel click "Refresh Tests"