Surgeon said lunate bone is fraying, and as a intracessous cyst what does that mean?

Varies: The term fraying is not usually used to describe a bone as much as soft tissue structures such as a tendon or ligament. In general, abnormalities of the lunate bone are typically either post traumatic or from an inflammatory/arthritic condition. Treatment is based primarily on the specific diagnosis.

Lunate bone: in the wrist can have cystic changes. Sometimes this is normal or from a slight bit of arthritis but there are conditions where the lignite blood supply is disrupted called Keinbocks disease. It is important to differentiate however if you are speaking solely about a cyst and some slight cartliage changes this could be what is meant by fraying as in the cartilage is thinning or fraying a bit