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This line is the narrator's description of the Pardoner. It means, essentially, that the narrator believes the Pardoner to be a homosexual, or perhaps even someone a eunuch, since a gelding is a male horse that has had its testicles removed. The Pardoner is also a fundamentally wicked man, who openly admits to swindling those who come to him to receive prayers for their sins. Nevertheless, his story is a condemnation of greed and avarice. When the Host interrupts the Pardoner by referencing his sexuality as he gives a sermon and tries to sell his relics after his story, the two men nearly come to blows. The Pardoner's sexuality is an issue because it relates to his ability to actually deliver forgiveness to sinners. By calling him a gelding, the narrator suggests that he is as impotent as the relics he claims to be able to use to provide grace.
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