That usually means that the sender's domain (the part after the "@" symbol) isn't capable of receiving email.

This error message usually will only occur if the nameservers for this domain are reachable and answering queries but clearly announce that the domain doesn't have any MX records and doesn't resolve to an IP address (NXDOMAIN).

This makes any bounce or reply messages impossible, and the sender's email address is considered invalid.

If the DNS servers are having temporary problems, and aren't answering for the domain, the message would only be delayed. It's only when the DNS servers for the domain authoritatively state that the domain can't receive email that one will get this message.

The sender should be specifying a valid email address when sending an email message. If the message doesn't require a reply (such as a Delivery Status Report), it should be sent from a null sender address. It is quite normal for recipient mail servers to reject messages if a reply can not be sent.

It is considered better to require the sender to correct any problems on their end and resend the message than to receive a message and not be able to reply to it.

This check is done prior to any whitelisting/filtering.