I believe they're saying that they were asked to add ads specifically for the mobile app. Their stance was that if the team for the mobile app wanted the app advertised, they could just buy any of the regular ad slots on the website.

The idea is that "try the Reddit app" is an advertisement and so belongs in the advertising system (as a house ad) instead of as a special-cased popup.

Yup, this. I see how my statement was ambiguous.

An ad telling people to download the Official Reddit Mobile App. I imagine that's what they are referring to.

I am pretty sure he means ads from the mobile app division of reddit for free.

Mobile ads are naggy popups, while regular ones feel like just another post.