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It means the first 4 bits of a 16-bit ID determine which bit position (0-15) to set in the bitset, essentially using part of the ID itself as an index into the bitset.

No, haha, it took me a while, too. "Index" is operating as a verb here.

The coordinates IDS are 16-bit long. The first 4 bits index (verb) which bit is set.

prs welcome

i updated the wording, hope its more clear