It means opening PNG files, saving PNG files, creating PNG files, etc without seeing XCF at any point (except perhaps if you try to use a feature - like layers - not supported by PNG when saving and GIMP showing a dialog to warn you about it).
Replace PNG with any other file format (outside of XCF, of course).
The technical side is irrelevant, i am talking about the UI and its behavior here, not how it could be implemented.
I'm not even sure what this even means. No matter what file you're editing, you're converting it to a gimp internal format when you open it, you're working with it in a gimp internal format, then if you "save" it back to the format the image started in, what you're saving is a conversion from the gimp internal format.
The UI makes that clear. What people are arguing for is to make the UI less clear, not to change anything technical.