People, especially people trying to work done on their computers, usually mean the former.
It still smells, because I cannot load my own web components library or/and my own CSS for use on all sites, so every site MUST reinvent wheel.
When Firefox for Linux used native GTK+ UI elements in web pages, with user theme applied, every web page looked like native applications. It was excellent. Then this feature was cut, because "every page must have the same look on every device/OS combination". F><k. Now every web application tries to reimplement the look of Gnome 2.x, and does it poorly.
Unknowing users can freely associate Wayland with bad vibes due to how KDE and GNOME chose to brand their new compositors but we can do better.
But if Kwin & Mutter aren't quite shit when it was combined with X, but are shit when combined with Wayland, how does that shape perceptions of Wayland?
In an alternative universe there would be Kwin the X11 display server which would replace Xorg. I’m sure it would just be as big riddled and feature incomplete in the early years of its development.