Presumably it just means that the engine constructs the levels from an exported image (such as a png, not a psd), instead of creating the levels from a more complicated data system. Because he knows the exact sizes of things, and "sprites" are a 1 to 1 mapping to game objects, he can easily do this. In a more complex game this would be impossible, but it works very well for his purposes.
Simcity 4k uses a similar technique for the region definitions. They're actually just an image file, each pixel represents the size of the different city zones, and IIR the RGB color of the pixel had some property as well. So if you wanted a region with all small or all big cities, you just opened up the file and edited it.
