It sounds like you are trying to set up a new iCloud.com account on the device if you are getting that message. What it means is that you have to set up that iCloud.com account on a different iOS device or on a computer. Once you have set it up, you will be able to sign in into the device in question.
You just can't create anymore new iCloud accounts on that device. Once they are created, they can be signed in there, however.
Best,
GB