According to https://support.microsoft.com/en-us/kb/910341 (cited further down by someone else, which is how I became aware of it), it means that
"the Automatic Updates service cannot impersonate the logged-on user to finish downloading and installing the update"
I, myself, am happily /not/ installing Windows 10, although Windows Update is failing to "Upgrade to Windows 10 Home" on a daily basis because of this problem. Hooray for the problem! May it last forever!
Note that, while I did reserve a copy initially, when I finally read the compatibility report and found that MY VIDEO CARD WAS NOT COMPATIBLE even thought Microsoft was blandly claiming that Windows 10 would run on my computer I de-reserved it. Microsoft, however, appears to be unable to take "no" for an answer.
But what I find most interesting is that the "Upgrade to Windows 10 Home" update is labeled "Important". Important to Microsoft, perhaps, as adding one more bot to the world's largest bot-farm; but unimportant to me.
Still, if you actually /want/ Windows 10, the advice concerning the SoftwareDistribution directory should work. That sort of thing worked in XP, why not a more modern Windows?