what does space-y mean in this context? Spacey, as in trippy (vernacular definition), in the way that Phillip K. Dick is? Or set in outer space?

If the second, there was a lot of sci-fi set in space for decades before The Left Hand of Darkness, and the cultural focus of that book and a lot of the new wave of science fiction writers of that time was a reaction against the outdated space focused science fiction of the previous generations.