Unknown version of Tomcat was specified in Eclipse

This happened to me because Tomcat was still in the process of downloading (Download and Install). The message disappeared after a few minutes.

The eclipse window should really have some type of progress indicator showing download status.

You are specifying tomcat source directory.

You need to specify tomcat binary installation root directory, also known as CATALINA_HOME.

Usually, this is where you untar apache-tomcat-7.0.42.tar.gz file.