We are all guessing at how it works, but if I were to try to translate that description I would guess that the first hop is used to anonymize the source address

We are all guessing at how it works, but if I were to try to translate that description I would guess that the first hop is used to anonymize the source address and it relays with an address that provides a region or country (so things like web site language or geo restrictions continue to work) but that the actual destination is encrypted to a key held by the second hop. The second hop passes along the generic IP address as the source, decodes the destination, and makes the connection. Address anonymizer does not know the destination, exit node does not know the source and only sees a regional pool IP address.