It means, your application and the supporting documents are being verified by the passport officer. On verification, your application is sent to the city CID office. That officer verifies your address / crime record / pending legal cases if any and certifies about it back to passport office. You would be called to visit your local police station once for verification. It is a formality wherein the police station in-charge will ask you about yourself, your residence, since how long you are staying there, why are you applying for passport etc. after that all the papers go back to passport officer. On completion of this process, all documents are scanned and are sent to Videsh Mantralaya New Delhi (headquarter of all passport offices). They will make the system entry and shall courier your passport (through your city's passport office). All this process approximately takes one month.