This file has been modified outside of Illustrator.

It means Illustrator thinks you (or someone else) opened the file in an application other than Illustrator, possibly made some edits, and then saved.

In the second part of the message, Illustrator would like to know whether you want to proceed with opening the file.

It's a disclaimer of sorts. Illustrator will open and let you work on the modified file, but if things get really messed up, Illustrator is not to be considered at fault.