It means that if people sense that a place is lawless, they will act lawless.
It's called the 'broken window' theory. It basically says, if some kid walks by an old factory with busted out windows, he's likely to throw a rock to break another window. If it's clean, and it's windows are in tact, he isn't likely to throw a rock at the window.
Rudy took this theory to heart, and as Mayor of NY, made a big point of arresting 'squeegy men', men who would 'wash' your window (usually making it dirtier) when you were stopped at a stoplight, demand money, and kick your car and spit at you if you didn't pay. He had them cited for jaywalking, and it turns out, most of them already had warrents out for their arrest for other things. People speculated that there were hundreds of these guys in NYC at one point, because they seemed to be everywhere. Ends up it was less then 100 guys.
Anyhow, his actions solved the problem literally overnight. It took less then 2 months. This was seen by many people as the start of the transformation NY has undergone since.
Commissioner Kelly's idea. A good one. And Rudy had the nerve to implement it.