Basically it means you need to update your configuration files. You can do this one of 2 ways:
or
I use the second one because the interface is a tad quicker and it backs up your config files in case all hell breaks lose. When handling configuration files, portage won't overwrite files in /etc or anything in CONFIG_PROTECT. So let's say xorg gets an update. You've got this xorg.conf file you spent 3 hours working on (like me

). Obviously you don't want that thing overwritten, so you can choose to keep it. However, you've got an /etc/init.d script that just got updated to fix a bug. Here you'd want to replace it in order to solve that bug. Another option is to merge the changes. This is mostly interactive, and lets you merge your changes and the new files changes. What you decide to do is generally up to you. Most people know what file they've edited in /etc, and what files can get replaced.