He means that they have mixed bathing, so there's no men's and women's side of the onsen and so everyone goes into the same bath, whether they know each other or not.

There are other arrangements, too, though. In addition to simply splitting the onsen between a men's side and a women's side, they can also change from one to the other, so you can have mixed bathing later in the night, while being split the rest of the time.