Impose means to force something on someone. An imposition is something unwelcomed that's forced on you. When you say "I don't want to impose," it means you don't want to inconvenience someone by joining them, or force them to hang out with you. it's usually used when you're not sure if someone invited you to join them because they truly wanted your company or just out of politeness. For example, you're eating alone in a restaurant and you see your coworker and his wife eating at the next table. Your coworker sees you and asks you to join them at their table. You're not sure if he really wants your company or just feels obliged to invite you out of politeness, so you can ask, "Are you sure? I don't want to impose." It's a common phrase that's used quite frequently. Just to add a point regarding social etiquette: Personally, if I had just a shred of doubt whether I would be imposing or not, I would just refuse the invitation. Because when you ask whether you're imposing or not, nobody is going to answer, "You know what? You actually would be imposing. I was just asking you to join us out of politeness." It's only when I'm certain I wouldn't be imposing that I use this phrase just as a formality to show that I know my manners.

To impose on someone is to ask more of them than you should. The person who is saying it's not an imposition is being too polite. Of course it's asking to much of someone to have them take off work for some project of your own.