I dunno if it means solely military zones or not, e.g. maybe certain key government buildings might be blurred/hidden/obfuscated too. The article seems very light on details.

Regardless of what's included in the above, I took the quoted sentence as meaning something like "because Google will blur the sensitive locations, Maps will now be able to provide directions between two points in South Korea instead of reporting 'Sorry, your search appears to be outside our current coverage area for driving'. This will enable it to be competitive with local navigation platforms". How many people will continue to use the existing services or switch over to Maps is not guaranteed, but I'm willing to bet the net effect is not 0.