I am not exactly sure what you are asking but..
I think what it means is that (unless you are in the flat or horizontal position), the actual joint effective weld size for design calcs is the weld prep depth, or "S" minus 1/8 inch.  So whatever minimum effective weld size engineering requires in design, you have to add 1/8" to the depth of "S" to be prequalified.  (example, If you are welding 3G or 4G and if the joint design needs 1/2" effective weld size "E" by design, then the actual weld prep depth "S" would have to be increased to 5/8"). 
I would appreciate others comments to confirm my understanding of this too.