A 'dump' is when someone 'downloads' the data from the ROM chip onto thier computer. If something happens in this process, whether it be a bad dumper mechanism, bad ROM chip, a blip in the saving of the ROM - anything - it could cause problems with the dump and therefore make it a 'bad' dump. Even if the game is playable, there might be problems related to incorrect data in the dump.
I'm not sure how common bad dumps are, but I know that sometimes it can take a couple tries and a lot of testing before you've vverified that it's a good dump.
One of the problem that the MAME devs face is that it's pretty tough to get thier hands on the hardware for some of these games. They sometimes don't get a lot of chances to get the data off those boards (hardware).
/Steve