Did you at all change your Java setup? Installed a new JDK, uninstalled one, etc
For whatever reason the exe has decided to clamp on to a specific instance it wants to run with, and claims it can't find it in your registry.
Pull up a command prompt and let us know what "java -version" results in?
I imagine you can run the game just fine if you run it out of IntelliJ or via the jar file. You should have a "runjar.bat" in the root of the codebase if you have it available locally, otherwise from the downloaded zip you should be able to run "java -jar Terasology.jar" and have the game launch.
If you have a working JRE/JDK, anyway, which may be the problem...