There are two parts to that question, and you need to fill out the one that applies to your situation depending on your circumstances.

The second part you referenced means that if you spouse is NOT elgible for adjustment of status in the US, the assumption is they will have to apply for a VISA in their home country first and the adjustment of status will be reviewed/approved/denied in the US consulate of that country.

Probably stil confusing! Can you give me your specific circumstances.

Is you spouse currently in the US?
How did he/she enter the US...what type of visa.
Was there an overstay after the visa expired?