For passport application, the file status on the website indicates that my police verification is "incomplete". What does this mean?

The most likely problem is:

Your police report says you have been at your current address for less than a year. It is necessary to obtain clearance from all your previous addresses for the past one year, for issue of a passport.

OR

The police report may have some inadequacies, or the police authorities may not have properly completed some columns. These are normally sent back to the police for completion. You may like to follow up with the police for speedier resolution.

OR

The police report indicates that some of the documents needed by the police to satisfy themselves regarding the period of your stay at that address, may not have been produced. In such cases, RPO writes to you for clarifications and thereafter processes your file further.

Applications pending at this office due to incomplete police reports, or non-receipt of police reports, can also be cleared if the applicants submit any 3 of the 16 listed documents. Post-issue police verification will be done in such cases.