Ok, so the description might be a bit misleading.
What they mean is: If you only have a baro and no GPS, you are able to enter altitude hold mode (but not position hold). If you have a GPS, you can enter both altitude and position hold mode.
If you only have a barometer, the position estimator (EKF2 by default) will use it's measurements to estimate the vertical position (and won't estimate the horizontal position).
If you also have a GPS, EKF2 will estimate the vertical position either with GPS or with baro measurements, depending on the parameters (baro is the default), and horizontal position with GPS.
If you enter altitude hold mode, the position controller will try to maintain the same vertical position (as reported by EKF2). The controller does not know or care how this vertical position estimate was computed.
If you enter position hold mode, the position controller will try to maintain the same vertical position as well as the same horizontal position. Again it uses the estimated position from EKF2. EKF2 does not change the sensors it uses depending on what the position controller is doing.