IIRC it means it generates an XSLT 2 meta-stylesheet. Which means you can use Xpath 2.0.
But it only requires XSLT 1 to generate that stylesheet. (Which is a pain, since some XSLT 2 engines will generate a message that they are running XSLT 1 stylesheet on an XSLT engine. The only purpose of this message is to annoy me and to add to the complexity of the universe.)
(I agree with Tony Graham that there is no advantage, and we would be better off just having discrete XSLT 1, 2 and 3 implementations, so you have to compile in the target XSLT version.)
Rick
Lisbon