It almost sounds like they just want to avoid something like an AWS LLMA service to spin up off their hard work but building an app around it would be fine.
Their language is a bit more suspicious:
Clause 9.1 - Subject to section 9.2, "Hosting Use” means any use of the Work or a Derivative Work to offer shared instances or managed services based on the Work, any Derivative Work (including fine-tuned versions of a Work or Derivative Work) to third party users in an inference or finetuning API form.
Well, if I send a message to my chat application "How to reset my password?" and it gets sent to the processing pipeline which gets a response out of Falcon LLM, is this not technically an "inference" context? I did provide access to their model, the model did perform inference, the user did get a result and the bot is a "managed service based on the Work".
This might be very problematic for commercial use.