This means that the theme has been loaded but there's an error in the WPS code, so it's reverting to the default system WPS (displayed over the background image of the theme). There's a sticky in this forum that indicates one of the major changes that happened recently (the progress bar code). Other things to watch for are %m tags, which are no longer supported. For a current listing of the WPS syntax you can visit the CustomWPS page in the wiki.
The changes were included in SVN on 6/23, I believe. Themes that say they were updated more recently should work.
If you do make improvements then you could help out by uploading an update to the theme. (I am assuming that this theme is not from the graveyard.)