What the narrator is referring to is the incident in which he actually shot the so-called "crazed" elephant. He never wanted to shoot it, but he felt the pressure from the natives to do so. He writes a story about this event to show how the imperialists were not free, but actually very bound by their beliefs and system. He felt like a prisoner rather than a person in a position of power in this village that he was made to police. He knew he should not have shot the elephant, it had calmed down and wasn't hurting anyone, but he had the villagers behind him silently urging him to do it. Even though he was supposed to be a powerful man among this territory, he wasn't, he was at the mercy of the villagers in every move that he made and so he shows us the true nature of imperialism. When trying to rule a territory far removed from the ruling power, a person feels powerless because the government is a more abstract body.
"The sole thought in my mind was that if anything went wrong those two thousand Burmans would see me pursued, caught, trampled on, and reduced to a grinning corpse . . .That would never do."
Even though he knows it's wrong, he still does it (at the suffering of the elephant because he had the wrong kind of gun) to avoid being disliked by the Burmans.