Your initial assumption was correct. The sentence you quote is probably describing what is now known as an indoor-outdoor area that combines elements of a garden with a living space. Most of the house would be enclosed:

> The floors of the individual homes on the outward terraced slopes penetrate inwardly of the “mountainside” to provide an 85-percent-enclosed family apartment set back into the “mountain’s” surface

I do agree that the idea of only separating the exterior parts of the houses with landscaping is a bad idea. Continuing the walls out to the edge would make more sense, good fences make good neighbours and all that. The biggest difficulty would be the visibility of your exterior space from above since lower levels project out further than higher ones. No nude sunbathing unless you aren't shy.

Honestly the dome overhanging the whole structure is the most ridiculous part of this plan. It doesn't make any practical sense. I could see an argument for doming the inner area like a sports arena though. It would be far more practical and useful to extend a glazed roof over the outdoor area to provide protection from weather and equip it with a retractable shade that can block the hot sun and prying eyes. Combined with walls on either side and you have a nice sun room that is more private and secure while still being much more luxurious than a simple balcony.