On hold means exactly what it sounds like. They’re suspending the hiring process. It could be for any number of reasons. Generally it has something to do with the firm’s priorities (temporarily) changing. They may want to add headcount in another place first. Or, they’re using the money to fund some other short-term initiative. Whatever. It just means they’re putting the brakes on filling that particular position.
Don’t think too much of it. It’s not personal or they would have just told you they’re not interested in hiring you. It’s just a business decision that you can’t do anything about. They’ll either start the hiring process up again when they need to, or they may decide they don’t need to hire anyone and close out the job posting.
It’s bad news in the sense that you’re not going to get the job anytime soon. But, it’s good news that you’re still in the running if/when they start the process again.
Edit: Weird I didn’t see ohai’s comment even though it apparently posted 14 minutes before mine.