The image below explains the rule better (from the FAA) when I asked them the same question. Essentially for pilots in the US, if you fly beyond the edge of a cliff on a tall hill or mountain, and only if the drone is still within 400’ of it in...
I am in the US, and was also confused by this as well and my questions were answered as follows:
As long as you are within 400 feet near (laterally or above) a building or hill, including mountains, Devils Tower or table top mesas, you can fly...
You are right- it’s about the intent of the flight. Shouldn’t the criteria also include that the aircraft is equipped with an approved and operating RID function or device, or is only being flown within an approved fixed site? Else there would...