It means that you hold a waitlisted reservation in the current booking class, not a confirmed reservation. You are not presently confirmed to be on this flight.
There is a waitlist per booking class; not per plane. So the airline might theoretically continue to sell confirmed tickets in C class while there is a waitlist for D class (the next lowest class bucket).
It sounds like your flight is overbooked in some respect you are likely to be offloaded. Continuing to sell seats in this scenario is unusual but it happens usually in the top economy bucket (Y) only.
Since you have been unable to check in I advise appearing at the airport early, and research your alternative options in advance (are you happy to fly later in the day or tomorrow? Would you insist on being re-accommodated on an alternative carrier? Know that Lufthansa may interline you onto Austrian or an airline in their group for instance but would be reluctant to put you on say American Airlines).
[Answer edited as question body did not match question title]