Assuming you are referring to this section: https://github.com/microsoft/azurechatgpt/blob/main/docs/3-r...

It means you run the front end (the chat-gui) and the backend code from the repo. This code connects to cosmo-db for uploading documents used for "chat with you pdf" and connects to an OpenAI instance on Azure for the chat inferrence.

I am pretty sure it means run the UI locally and access Azure-hosted ChatGPT. The environment vars seem to indicate that as well.