What's happening here is that a product with this alert is LINKED. If you navigate to the category management screen, you'll see a YELLOW SQUARE next to the offending product.
LINKED products are useful, as the function allows you to feature a single product in more than one category.
Basically it's the SAME product data-set, that is rendered more than once - each time in a different category.
Zencart is asking you to specify that product's MASTER CATEGORY. This means, ZC wants you to specify the category where the master record is located because if you later EDIT that data, you will have to edit the "original version" of the product and not its "linked counterpart".
This is important, becuase if you call up the wrong version (the one that's NOT in the Master Category) and change its price, or description, you will have a CONFLICT of data in different parts of your store.
If you edit the version that resides in your MASTER category, then the changes you make will automatically apply to the LINKED versions as well.
Please note that when you "copy" a product, you have an option to either create a DUPLICATE product, or a LINKED product.
A duplicate product is not the same, and it is a complete "stand-alone" from the original from which it was copied. It is edited independently of its original, and is considered by your ZC as a totally separate product.
A LINKED product relies on one data-set, and this must be administered in one place only - that place being the MASTER category you assign to it.