(Warning: this post meanders around a bit. It's mostly some musings that I've tried to develop a little. The ending could use more clarification and development.)
What does that mean?
That "the whole business of life" does not meet whatever criteria or standards constitute perfection.
What do we mean by "the whole the business of life"? Something about "how things are." Presumably, the phrase denotes the fundamental circumstances underlying existence. It indicates something about the universe as it appears to us, specifically as it relates to our lives as sentient, feeling beings.
What does it mean to fall short of perfection?
It means we possess some notion of perfection--however ill-defined it may be--yet the world does not accord with this notion. It means that I, the speaker, assert that things would be better if they were more like my notion of perfection. As it turns out, we can group all desires which employ the imagination under this rubric: the impoverished person asserts that her life would be better were she only to win the lottery, the hungering person imagines himself better off in a scenario where his belly is full, etc. The difference, then, between an ordinary desire and a statement about the universe (or life as a whole) is one of scope; I assert that life is imperfect because of something fundamental to how reality is structured. (Usually the imperfections in question pertain directly to how reality affects humans, since, of course, it is humans who make the assertion). However, these kinds of universal assertions suggest a further meaning beyond those of ordinary desires: when I say, "The universe would be better if _____," I imply that it would better for all people and all things, not just for myself. Clearly, it is nothing more than a single thinker's opinion, and no doubt I only propose changes that would benefit myself. Nonetheless, I give the impression of espousing an opinion something like the following: in some deep sense, all of life would be ameliorated by the perfection I wish upon it.
How can this thought be justified? How could I possibly entertain a hubris to the degree that I believe a lowly, imperfect, epistemologically impoverished mortal could hope to prescribe a state of affairs that would benefit the entire universe?
Well, perhaps I don't believe anything that grandiose. Perhaps I merely assert that things would be better for me (and probably those I care about, whether that ends up being just my family, friends, peers, or all sentient beings) if the universe were as I wished it. Still, it is a remarkable claim, given the extensive complexity of the universe and the so very limited extent of human comprehension.
Nonetheless, we pass beyond these concerns for now. Let us allow the finite-yet-hubristic, imaginative being to keep her notion of perfection; let us allow her envisioned state of affairs to accurately depict a "better" world. We pass too beyond how it is possible to evaluate "better" from an objective standpoint (since it may, indeed, be impossible). At present, we are concerned only with the following: to the individual, what does it mean to exist in a universe which does not agree with her desired, imagined universe?
Thomas Nagel and Albert Camus (in "The Absurd," and The Myth of Sisyphus, respectively) characterize absurdity in similar ways. Both writers describe the absurd as a particular kind of discrepancy between what one expects, desires, or seeks in a situation, and what actually obtains.
To loosely sum it up:
Reality ≠ pretense.
To use Nagel's examples, it is an absurd situation when a philanthropic committee elects a heinous criminal as its chairman. It is absurd when a situation requires solemnity--say, a respectable person is being knighted--but the prospective knights' pants fall down.
(Side note: irony is a similar concept to absurdity, in that it is a discrepancy between the image or sentiments one expresses and the reality or beliefs one actually entertains. So, irony might too be described as a mismatch between reality and pretense, only it is an intentional and deceptive mismatch.)
Nagel, Camus, and I differ slightly on the specifics of what makes the human condition absurd. Camus holds that our incessant need for meaning in the face of a wholly meaningless universe creates absurdity. Nagel focuses on the fact that we take our lives seriously, but unjustifiably so, since it is always possible to adopt an external viewpoint (sub specie aeternitatis) where none of our aims or goals are important. Camus and Nagel's viewpoints are closely related, since Camus' "meaning" is arguably similar to Nagel's "importance" (although there are a few other subtle differences). My particular take on the matter is as follows.
The life of a human is absurd because we dream, but more so because we are aware that we dream. That is to say, absurdity as a pervasive, ineliminable aspect of the human condition inheres because we possess the ability to mentally simulate counterfactual circumstances; the absurdity is exacerbated by our awareness of that ability. It is only because we can imagine and desire a perfect world, only because we imagine it with some sense of "should" or "ought" that relevantly applies; but, we are incapable of ever actualizing that world.
Note: I have not delved very deeply into secondary literature to see what else has already been said on absurdity. I have noticed that Jeffrey Gordon ("Nagel or Camus on the Absurd?", Phil. and Phenom. Research, Vol. 45, No. 1. (Sep., 1984)), for one, might be relevant, but I am frankly too lazy to treat it in adequate detail at the moment.