That’s what they’re saying.
Essentially - if someone from the small instance subscribes to a community that has a ton of data (huge post volume, images, whatever), the small instance needs to pull data over from the larger instance. At some point there may be communities that are so large small instances can’t pull them in without tanking.
Not sure it makes no tracking much of a reality, it’s easier to track people because of how activitypub works.