You have received this message because Xara Picture Editor detects that the original unedited version of this photo has been altered (for example if you edited it in another program). XPE looks for your original picture due to its innovative non-destructive master file editing technology, which ensures pictures won't suffer from destructive editing or cumulative distortion. Find out more.
Select 'Open the selected photo' to open your edited picture file. This means you are effectively starting again with this new picture and won't be able to undo any previous work.
Select 'keep this original master photo' to proceed anyway, using the modified master file, and you will be able to use the picture in the normal fashion with the ability to undo past edits etc.