This dialog shows conflicts that have to be solved before the update can take place.

If you see the "Update anyway" button, the conflicts can be solved automatically by Superversion. For example, two incompatible versions of a file are merged and the merged areas are marked with special lines (<<<, === and >>>). You can then open the file in your editor and correct it manually.

If there is no such button, there are conflicts that cannot be solved automatically. What you usually want to do in this case is delete the file in question (make a backup copy if necessary) and then update again.