What does it mean to be paranoid? does this mean that something is wrong mentally?

Possibly so.: If you use "paranoid" as common slang, it isn't likely to be a mental health issue. That word is thrown around a lot. If you are seriously using "paranoid" with concern that who you are talking about has had an atypical shift to paranoia (excessive fear, suspicion and severe apprehension) it may very well herald a deep depression or some type of major disorder of thinking, well beyond true reality.

It's a symptom: Like fever it's a symptom of being hyper vigilant and reading things into situations based on your own preoccupations--it can manifest with hallucinations &delusions in more serious illnesses.

Yes: Paranoia--the expectation of trickery or harm, comes in a range of severities, from the hypervigilance and being "on guard" that one experiences after being traumatized, to the severely paranoid and delusional that one sees in paranoid schizophrenia, delusional disorder, or sometimes in bipolar disorder. Severe paranoia is always a symptom of a serious psychiatric condition.