
Regarding "appearance", Strong's Concordance has this defined as:
that which is seen, form
So, we need to keep away from every [blank] of evil. I think both appearance and form are appropriate here. But I think that we need to take "form" as not just "type" (as in "every type of evil") but also as "formation" ("every formation seen of evil").
Even the English definition of "form" seems to back this up a bit:
From Dictionary.com
1.
external appearance of a clearly defined area, as distinguished from color or material; configuration: a triangular form.
2.
the shape of a thing or person.
There's a sense of a physical formation, something seen.
However, taking this in context we can see that "appearance" is a good word choice as well. If we change "appearance" or "form" to "sighting" (strongly indicating the physical aspect of sight), then it still makes sense to use other translations:
"Flee from every sighting of evil."
I think this would be just as valid translation. It's not just that you want to avoid the appearance within yourself, but also the appearance anywhere in the world.
I suspect that's why other (more modern) translations have avoided "appearance of" in favor of "type" or "form", since the idea is that we want to avoid the external evil that we find, not that we want to avoid "appearing" evil to others.
Ultimately, this verse is about what we see, not what others see. It's a command to us to avoid things that we see that are evil -- avoid things that in our sight are evil.
Edit
My initial answer was answering the question, "Is this a good translation". However, I see that the title is "What does this mean"? Those are two very distinct questions. So, here I'll answer the other question, "What does this mean?"
It can often be difficult to understand verses that are not in context so that if you take them out of context, they tend to lose their original intention. I think it's important to look at the entire verse, in context, to get a full picture of what it's trying to say here:
1 Thess 5:19-22 (NIV)
19 Do not quench the Spirit. 20 Do not treat prophecies with contempt 21 but test them all; hold on to what is good, 22 reject every kind of evil.
Furthermore, I encourage you to read the entire chapter of 1 Thessalonias 5 to get even a better picture.
What Paul is trying to say in this letter is to hold fast to good and reject evil--don't be like those around us.
1 Thess 5:6 (NIV)
So then, let us not be like others, who are asleep, but let us be awake and sober.
The idea that permeates 1 Thessalonians is to stay strong in the Lord, to not turn aside towards evil ways.
In the context of this book, we can see more clearly that 1 Thess 5:22 is saying we should avoid evil in all its forms. Just before that it says we should cling to that which is good.
That's the meaning of this verse: turn away from evil; cling to what is good.