“The raw height data is stored in metres and must be scaled down to fit within the 256 block height limit in Minecraft. A maximum height of 2 500 metres was chosen, which means Ben Nevis, appears just over 128 blocks high.

“Although this exaggerates the real-world height, it preserves low-lying coastal features such as Bournemouth's cliffs, adding interest to the landscape.”

- http://www.pcgamesn.com/minecraft/ordnance-survey-recreate-g...

So they are keeping to the 256 block height, but being slightly creative with the vertical scale...