> The Steam App did this.
It did not, because it cannot validate what it does not have. The reverse proxy in question redirects traffic away from the server to an unrelated location. As such there is nothing for the server to validate since the user traffic is somewhere else.
> Thus Steam is vulnerable to a MITM attack.
The traffic did not go through the attacker to the intended end point. It just went to the attacker.
> I don't understand what this means?
Impersonation is pretending to be somebody else. MITM is more than impersonation in that it must fool both end points, not just the user, of the connection.
> The Store (store.steampowered.com) believes that the user is anyone who can produce the user's credentials.
You are insinuating a replay attack, but there is no evidence of a replay attack. In a replay attack one end of the communication sends a message and an intercepting attacker replays the message for the distant end.
https://en.wikipedia.org/wiki/Replay_attack
Literally all that happened is that the attacker intercepted traffic and redirected it to a different location that is not the intended server. That is IP address spoofing, which is bad but far less bad because its easy to find if you looking for it. For this to be a MITM the attacker would have to intercept the traffic and route it to the intended server. MITM attacks are severe, because they are very challenging to detect since both end points believe the attacker is their intended end point and both end points are exchanging data without indication that trust is violated.
* https://en.wikipedia.org/wiki/IP_address_spoofing
* https://www.techopedia.com/definition/4020/masquerade-attack