"Smart object" message prevents editing layer

When I create a new layer by placing an image from another file and then try to edit it (like removing the background from an image) I keep getting this message, "Could not complete your request because the smart object is not directly editable."
What does this mean?

When you 'place' an object into an exisiting image doument, you are doing so as a 'Smart object' which can not be edited inside the new image.  If you just paste the object instead of placing it, it will do so as an ordinary layer.  If you don't want objects dragged into the new document to be Smart objects, uncheck that option in General Preferences.

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    hi
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