As embarrassing as this is to admit, check your Source tab. That error can also come up when you think that the feature class you are editing is in the same database as the other data you have in the MXD but it really isn't. Yes, it's selectable, but when you try to do any kind of edit, or even look at it's vertices, it will return that error message along with a string of others.
You have to choose a defined coordinate system when you start a job or a project. Then you can modify or trasform the shp coordinate system to another with the standard toolboxes