> [A README.md is] a way of flagging to developers: "The code in this directory builds, deploys and/or runs separately to other code in this repo."

I disagree, that's merely correlated to the real purpose: A file-level README is something an author adds when they anticipates something about the mental-state of future readers. In particular, that a reader won't arrive already-prepared to understand or navigate.

While that often happens at "project roots", it is by no means exclusive to them, and it can still happen in sections with extremely tight dependencies or coupling that could never exist independently.

Analogy: While many roads begin with a speed-limit sign, it is not true that every speed-limit sign indicates you've entered a new road.