What does Luke 7:17 mean?

Jesus has raised a man from the dead. The townspeople and the crowd that came with Jesus glorify God and fear Jesus (Luke 7:11–16). The news spreads.

"Judea" doesn't refer to the tetrarchy where Jerusalem is. It means the regions where Jews live, specifically, the districts of Judea and Galilee. Starting from the northwest and going clockwise, the "surrounding country" includes Tyre and Sidon, where Jesus heals the Syrophoenician woman's daughter (Mark 7:24–30); across the Jordan to Batanea, where the transfiguration takes place and Jesus heals the demonized boy (Luke 9:28–43); south to Decapolis, where Jesus heals the demoniac in the tombs (Luke 8:26–39); Perea, where John the Baptist is imprisoned (Luke 3:19–20); and west again to Samaria, which sits between Judea and Galilee and is where John and James offer to throw down fire upon an unhospitable town (Luke 9:51–56).

Most importantly, the report reaches John the Baptist (Luke 7:18). He has been imprisoned by Herod Antipas, who governs both Galilee and Perea. Jesus is in Nain in the far south of Galilee. According to ancient Jewish historian Josephus, Antipas imprisoned John in Perea because John speaks out about Antipas' marriage to his brother's wife Herodias (Luke 3:19–20).

John has trained his disciples to look for the Christ (John 1:35–36). When they hear what Jesus is doing, they report to John. John understands that all these miracles fulfill the Old Testament prophecies about the Messiah, but Jesus' work is incomplete. He hasn't judged the wicked, like Antipas, nor freed the prisoners, like himself. This provides just enough opening for doubt to creep in: is Jesus really the Messiah, or did John waste his entire life?