At any rate in general it just means that the binary version is directly modified instead of, say, modifying the source and recompiling it. When the source is not available you don't really have a choice.
It doesn't mean however that you'll just open a big binary dump of the program in emacs and start flipping bits manually. In general you'll first disassemble the code to figure out what it does, isolate the part that you want to modify, implement the modification and then you end up with a binary patch.
That's easier said than done though, reverse engineering a complex binary is very time consuming.
It reminded me of this anecdote: https://en.wikipedia.org/wiki/Wing_Commander_%28video_game%2...
>As development for Wing Commander came to a close, the EMM386 memory manager the game used would give an exception when the user exited the game. It would print out a message similar to "EMM386 Memory manager error..." with additional information. The team could not isolate and fix the error and they needed to ship it as soon as possible. As a work-around, one of the game's programmers, Ken Demarest III, hex-edited the memory manager so it displayed a different message. Instead of the error message, it printed "Thank you for playing Wing Commander."
And still ppl who crack games do it very often. They start with a obfuscated binary, decrypt it and patch it to remove the protection.
Very different from trying to figure out everything a program does.
Surely this is easier then a full understanding of the code?