The projection file for the dataset could not be copied. This may be because the projection for the input dataset has not been defined, or defined improperly. If the dataset has been moved with the file system instead of ArcCatalog, the projection file (prj.adf) may have been missed.
Ensure that the source dataset has a valid projection file. If there is a prj.adf file present but it seems to have problems, you could try either reestablishing the projection with the Define Projection tool or possibly copying the file from an existing dataset (with the same projection) that is known to be valid.