jegner,
As already mentioned in earlier posts, you should check that telnetd is running and that the Firewall is not blocking access to port 23. Also, you might want to look at /etc/hosts.allow or /etc/hosts.deny if they do exist. I used to have this same problem in the past, and I altered the hosts.allow file to provide access control to my telnet. But these days, SSH is a better choice.
ase2dais,
To my knowledge, SSH is somewhat similiar to telnet, only that it is more secure. Telnet sessions do not use encryption, therefore one is able to sniff and listen on telnet sessions. This is a security issue as usernames and passwords are passed on in plain text. In SSH, data is encrypted, therefore the session is more secure.