The Group Policy Client Side Extension Software Installation was unable to apply one or more settings because the changes must be processed before system startup or user logon. The system will wait for Group Policy processing to finish completely before the next startup or logon for this user, and this may result in slow startup and boot performance.
Vista and Server 2008 log this warning when a Active Directory software distribution is assigned to the computer.
Windows tries to apply group policy updates in the background, software installations however need to be processed in the foreground during a system reboot.
As such, this message tells you that one or more group policy updates require a reboot before they can be applied.