Randy Pausch is referring to an occasion when he went for a walk with his friend and mentor, Andy van Dam, a professor of computer science at Brown, who delivers the last lecture's closing remarks. During their walk Andy puts his arm around Randy's shoulders and says,
Randy, it’s such a shame that people perceive you as so arrogant. Because it’s going to limit what you’re going to be able to accomplish in life.
As Randy acknowledges, this was his friend's polite way of telling him that he'd been acting like a jerk. He doesn't come right out and say "Hey, Randy, you've been acting like a jerk." Instead, he tells him that that's how people often tend to perceive him. This is bad enough in itself, but what makes it worse is that it prevents Randy from accomplishing what he wants to in life. He will achieve so much more if he becomes less arrogant, less self-confident, starts to see himself as others see him. It's this kind of frank, honest feedback—this tough love, if you will—that Randy comes to understand as invaluable for his personal growth and development.