Stack Trace:
java.lang.NoClassDefFoundError: io/netty/channel/ChannelInboundHandler
at com.comphenix.protocol.injector.PacketFilterManager.(PacketFilterManager.java:227)
at com.comphenix.protocol.injector.PacketFilterBuilder.buildInternal(PacketFilterBuilder.java:250)
at com.comphenix.protocol.injector.PacketFilterBuilder.build(PacketFilterBuilder.java:233)
at com.comphenix.protocol.ProtocolLib.onLoad(ProtocolLib.java:213)
at org.bukkit.craftbukkit.v1_7_R4.CraftServer.loadPlugins(CraftServer.java:374)
at net.minecraft.server.v1_7_R4.DedicatedServer.init(DedicatedServer.java:152)
at net.minecraft.server.v1_7_R4.MinecraftServer.run(MinecraftServer.java:458)
at net.minecraft.server.v1_7_R4.ThreadServerApplication.run(SourceFile:628)
Caused by: java.lang.ClassNotFoundException: io.netty.channel.ChannelInboundHandler
at java.net.URLClassLoader.findClass(Unknown Source)
at org.bukkit.plugin.java.PluginClassLoader.findClass(PluginClassLoader.java:101)
at org.bukkit.plugin.java.PluginClassLoader.findClass(PluginClassLoader.java:86)
at java.lang.ClassLoader.loadClass(Unknown Source)
at java.lang.ClassLoader.loadClass(Unknown Source)
... 8 more

What version of ProtocolLib are you using?