How can I change the message displayed when required fields empty

You can change the message for individual form fields by editing the field, going to the Advanced tab and customizing the validation message.

However the message you referenced above is the form wide validation message. Currently this can only be customized by a filter using PHP. Here is an example of the filter you would use to do this:

<?php
add_filter("gform_validation_message", "change_message", 10, 2);
function change_message($message, $form){
return "Failed Validation - " . $form["title"];
}
?>

you add the code snippet to your theme's functions.php file.

You never want to edit the core plugin files if you ever plan on updating to the latest version of Gravity Forms because any changes you make will be overwritten by the update.

The API hooks are there to allow you to change the functionality of Gravity Forms WITHOUT having to edit the plugin files themselves. This makes updates seamless so you can upgrade without overwriting your changes.

We always recommend users make changes using the API hooks and placing the code in the functions.php file for their theme.