It means the directory has become corrupted.

Since Disk Utility can't fix this, I'd recommend getting Disk Warrior, which will be able to fix this problem (but does cost around $100).

Alternatively, a corrupted directory is often the first sign of a failing hard drive, so maybe that money would be better spent on a replacement HD. As long as you can get a complete backup of the drive accomplished, that MAY be a better use of the money. PS. If you're not comfortable taking apart an iMac, have a tech do it.