I don't understand this explaination.
With a deterministic wallet you create from an initial seed a sequence of bitcoin addresses. Imagine counting 1, 2, 3, 4, etc.
You can create as many addresses as you like, but not all of them will appear on the blockchain. For instance I might create one especially for you to give me 1,000,000 BTC. That is (alas!) probably not going to be used.
When you are recreating a wallet from scratch you do not know which is the last address used. So you start at the beginning and see what is on the blockchain. Then you look for the next one in the sequence. The gap limit is how many 'misses' you accept before you give up and stop looking.