What exactly does 'needs update' mean?

  I've come to accept the term 'needs update' when I've forgotten to 
stash or commit before certain Git operations.  However, I got cornered 
today and was asked to explain what it means.  I had to admit I don't know.

What does "you can't do this operation without having a clean working tree and these are the modified files currently preventing the operation from proceeding" have to do with "needs update"?

Thanks.

Josh