This might also be caused by VSCode updating while it's running. Extensions and the extension host can start to behave weirdly in this case. This is resolved by reloading the window or restarting VSCode completely.

You may also notice "Restart extension host" buttons in the extension manager. Pressing it causes a "Version mismatch" error to pop up if the issues were indeed caused by an update. This too is resolved by reloading the window.