Its meaning is that the person who 'doesn't know any better' does not realize that he is making a mistake.

He doesn't know that he is mistaken or that what he is doing is wrong. "Tom shouldn't be handling that electric wire. It's live and he could be hurt and electrocuted." "I'll tell him. He just doesn't know any better because he's never worked around live contacts before." "Don't punish him for using your tools. He just doesn't know any better because we never told him not to do it."