The expression "elephant in the room" refers to a situation where something major is going on, it's on everyone's mind and impossible to ignore -- like an elephant in the room. But nobody talks about the "elephant" because nobody knows what to do about it.
For example, Uncle Nimrod is busily getting drunk again at the family Thanksgiving dinner. There's going to be a drunken scene. But everyone feels powerless and choses to ignore his behavior.
It's along the same lines as "the emperor's new clothes." The emperor's naked but nobody wants to be the first to say so.