It means the lens is stuck and/or broken and will not extend. If you are feeling techno-savvy you can open it and replace/free the parts in the lens rings that are malfunctioning, or you can just get a new camera.

It's kind of hard to explain, but basically there are little plastic runners in the lens tube and when they get jammed or broken the lens will not rotate hence will not extend.

This guide should help with the repair if u decide to do the repair: Sanyo VPC S1275