It could mean a number of things.
1) Your sound card can't sample the audio fast enough.
2) Your PC is slow, not enough RAM.
I could go on but I won't.
Try this:
Go to Options > Project > General
(It might be under Options > Global ...but I don't think so...
At the bottom you need to make the audio buffer as big as possible. Sorry I can't be a little more exact but I'm not at my studio this weekend.
You will get more latency, but it could fix your dropout.
What kind of sound card do you have?
If you have too many IO's enabled that can cause dropout too.
What it the bit width of your sound card 20 or 16?
Give some more details about your setup.
Nemal.