They've always meant apps that offer more or less the same functionality as official Twitter clients.
For the people who actually read the terms instead of picking up their pitchforks back when Twitter had that big tos "change of heart" would have understood that They definitely could have handled it better and been clear that the user limit was really meant for Twitter-clones.
It's clear they want to control the way most people use Twitter, but also to show advertising. As best I can recall, the tos change came around the same time as they started putting in ads. Besides the few remaining twitter clones always play catchup when Twitter puts out new features (recent example; polls).