What does it mean? It means you're headed for trouble of one kind or another. Either the guy is with the wrong girl, in which case he should break up with your girlfriend and start dating you. Or your girlfriend is with the wrong guy because he's making moves on one of her best friends.
If he's as sweet as you say, he should be able to see what a difficult position he's putting you in. So I suggest you talk with him and tell him it doesn't feel right so he should either put more distance between himself and you ... or him and his girlfriend.
If you let this go on, you may well find yourself caught in a really unpleasant love triangle. I wouldn't wish that on anyone because there's never any winners.