The ‘M’ stands for Matrix, Magic, Membrane… or anything else pertinent you can think of that starts with ‘M’ that suits your taste (this according to Witten himself). Although wags will say it’s actually an upside-down ‘W’ standing for Witten.
The biggest (theoretical) problem with M theory – should it indeed come to completion – is exactly how the extra dimensions outside of the four we are familiar with (as our perceived spacetime) “compactify” out of the way of our normal observations. (This goes for all the string theories that are limiting cases of it as well as supergravity, too.) This where those Calabi-Yau manifolds you may have heard about come in. A rough estimate is that there might be 10^50 different ways this might happen, each represents a possible universe with its own (unique?) physics. How do we pick out ours? What is the status of the others? Every other major physical theory has pointed us toward a single answer in the end, rather than a multitude. This is the crux of the “Landscape” controversy.
The other big problem is how to come up with experimental evidence to support the theory. Even the largest conceivable particle accelerator will lack the power to probe the regime where it is thought the Standard Model clearly breaks down.