It means, your iMac has extended its desktop to TV...
There are two different modes available when u connect an external display/TV to ur iMac.
1. Extended Desktop (Which you have right now): It lets you use both screens for different tasks at the same time.
2. Mirror Display mode: In this mode, whatever is on your iMac screen will be mirrored on your TV screen as well.
You select the mode which suits you from System Preferences>Displays.
Now when you are in mirror mode you'll be able to see movie on both of the screens & when you're in extended desktop you can simply drag the movie window to your TV screen & you can still use your imac screen for other tasks if you wish to...
One thing you'll need to keep in Mind is, if you want to hear your audio through TV then you'll also need to connect your iMac's Audio out to the TV/Speakers, since iMac only sends video signals to your HDMI input in the TV.
When you want to watch movie in full screen, in VLC, once in full screen mode select the Video output to screen 2 by Video>Screen 2 or same applies DVD player.
Cheers.