Yes, that's what he's talking about.
Cut the pvc coming out?
That depends on the type of flooring you'll be putting into place - will you be laying tile? If you will be then take the thickness of your new floor into account.
If no thicker flooring then, yes, cut the pvc flush and install the new flange - your wax ring for your toilet will make the transition smooth.
The toilet flange has 2 functions. #1 - it attaches your pipe to your toilet. #2 - it attaches your toilet to the floor. So by replacing the 2 in 1 pvc unit that you do have you will be using the new flange to take care of #2 - and the screw-fittings that attach your new flange to the floor will assist with #1.
Sometimes the convenient 2/1 products such as a toilet flange with pvc stem don't solve all the problems.