It means their internal model is updated with new data at runtime, and that this internal representation is flexible enough to build a context sensitive relationship between concepts.

It's this representation that is then used to generate words.

Words are merely the output.

It's like saying our conversation is just text completion. It's done by text but the fact there are relationship between concepts I'm trying to convince you of makes it more.

I don't think that is substantially different to what a LLM is doing, outside perhaps the motivation.