Thanks to vaccinations nowadays, you may not remember measles (we certainly don't). But let's just say that it's a rather unpleasant illness, which was a bit of a problem on the Oregon Trail. Oh, and it involved a whole lot of splotches on the skin. Blech!
Unfortunately for little Eric, everyone in the Kingdom of Binn thinks he's got them. Which means that in this story, measles represents a sort of banishment from the rest of the group.
When Lord Droon wants to keep Eric away from the king, he sets him up in a house with a "Measles" banner across the front. In this way, Eric is kept completely isolated from the rest of the town, and the guards will not let him leave or see anyone, lest they catch his disease (read: lest they learn the truth about Droon's dirty dealings).
But in the end, this catches up with Lord Droon when he is doled his punishment:
Then the King punished Droon in a most fitting way. He sent him to live by himself, with a guard of Patrol Cats, in that old deserted house with the sign that said, "MEASLES." (118)
He too, must stay in a house with the word "Measles" across the front, which means that no one will come near him because they're afraid of catching that yucky disease and becoming bespotted. The king is effectively banishing Lord Droon and setting himself apart from the rest of the townsfolk.
He is no longer considered a part of the kingdom, and is not allowed the same rights and socializing privileges that everyone else is. No more friends for Droon! Though we suspect he never had many to begin with…