I don't think he is saying to just let them win. We do the same with the lower belts. we use control and don't attack as much as to help them become aggressive. They also can learn distance and timing from us if we don't attack or defend to aggressivly.
I will sometimes tell a jr. belt that I will not throw a single punch or kick so he/she can hit me at will, if he/she can. I will go multiple rounds with them an just use reading, footwork and timing to make them miss every technique. Once they see this they start to understand that you don't have to stand and block to not get hit. Movement is the best way to not get hit. Most times standing and blocking = getting hit.
After a few rounds of me doing nothing but moving, I then go a few more with countering while moving. This shows them how to counter with timing right after an attack. You don't wait for the attacker to finish his technique but rather counter during the end portion of the attack. This is the single most difficult thing for most fighters to pick up.
When an instructor or higher belt spars with a lower belt or student then you must also communicate while doing so. Just getting in there and beating them up really does no good. I will only break them and make them quit. But I think instructors must spar with students to help them not for any other reason.
Now when an instructor spars with an advancded student (BB any DAN) then they can go at it a bit more. The BB student should be able to learn from getting hit and adjust. You can still communicate also but you don't have to hold back. Now when said BB student becomes better than the instructor in sparring or fighting (most likely due to age) then the instuctor should leave that student be and have him then spar with the next up and comming student(s). Then they can push and help each other.
