Erase Data Disabled and On

(This picture taken on my iPad, but something on iPhone.)

My interpretation of what this means is, "the erase-data feature is on (yes, it will erase everything after 10 failed attempts), and something else in my settings prevents me from modifying this setting."

However, an alternative interpretation is, "the erase-data feature is not available (not even an option, so it will not erase after 10 failed attempts) because of something else in my settings, but if it were available, it would default to 'on.'" 

Which interpretation is correct?