The meaning is that the fox is a poor guard for the chicken coop, because they are most likely to eat the chickens within.

For Example:
A long time ago, the FAA was very lax in regulations. They required Airline manufacturers to get their planes certified, but all the documents were stored by the manufacturers. In other words, many reporters compared this to the fox guarding the chicken coop. The FAA trusted the aircraft manufacturers to keep and mantain their own certifications, which the companies could keep private from the FAA. The idea was that the airline companies shouldn't be trusted with this information, it could be forged, and withheld,etc.