If you see this error, it means that the dataset does not have spatial reference defined. You need to make sure that you know what the appropriate spatial reference is, and define the dataset.
To define a dataset, open ArcCatalog > Navigate to where the dataset is saved > Open the ArcToolbox by clicking on the red toolbox > Click on Data Management Tools > Projections and Transformation > Define Projection > This will pull up a dialog box. For input dataset enter the dataset that needs to be defined. For coordinate system, choose the appropriate spatial reference by selecting it or importing it from another dataset > Click OK.
You should add the newly defined dataset into a fresh ArcMap project, rather than an old one.
To define a dataset, open ArcCatalog > Navigate to where the dataset is saved > Open the ArcToolbox by clicking on the red toolbox > Click on Data Management Tools > Projections and Transformation > Define Projection > This will pull up a dialog box. For input dataset enter the dataset that needs to be defined. For coordinate system, choose the appropriate spatial reference by selecting it or importing it from another dataset > Click OK.
You should add the newly defined dataset into a fresh ArcMap project, rather than an old one.