Figure 1: Alert dialog.
The CD-ROM firmware updaters were created before Mac OS 9.x existed. The installers are unaware of the Mac OS 9.x environment and the message should be interpreted with this in mind. The firmware update should be applied, regardless of the Mac OS level. It is fine to continue.
Before running the CD update, refer to the following articles for more information on when and how to install the CD update 2.0.
Article 24714: "Power Macintosh G3 CD Update 2.0: Read Me"
Article 60458: "iMac CD Update 2.0: Read Me"
Article 31090: "iMac CD Update 2.0: Frequently Asked Questions"