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I think that term refers to edible protein sources from unicellular organisms, not a misunderstanding of biology (though I understand that’s how it can seem).

Protein here is used as in "chicken is a protein". It's confusing though.

what about the "thin air" part? Does this imply they can only grow it at extreme altitude?

They collect CO2 and water from air. The water is split via electrolysis to get hydrogen for the knallgas bacteria to feed on along with the CO2, minerals and ammonia. [1]

There is a path for the ammonia to be directly source from the air as well via plasma nitrogen fixation. [2]

[1] https://youtu.be/z8zuqR95fqA

[2] https://www.mdpi.com/2073-4344/10/2/152/htm

Also, in case you don't know, "out of thin air" is an English idiom for "From nothing, as of something that has suddenly materialized. out of nowhere; out of nothing. ". [1]

[1] https://idioms.thefreedictionary.com/out+of+thin+air