What did Agrippa mean by saying to Festus this man might have been free if he had appealed to Caesar?

Paul had in fact appealed to Caesar. The statement in the question actually includes the Word 'not'.

32Then said Agrippa unto Festus, This man might have been set at liberty, if he had not appealed unto Caesar.

What Agrippa meant was that Paul was actually innocent of any crime. However, since he had appealed to Caesar, he thus had to go to Caesar to have his case heard and could not be released until this process was gone through. It was Paul's appeal which thus caused him to remain a prisoner, together of course with the Roman custom regarding appeals to Caesar.