What is this Outlook "Rules" warning actually telling me?
Outlook rules daisy chain, in a cascade, so each email is processed against multiple rules. To answer your question, the "Stop Processing rules" step applies only to the current mail, which meets the required criteria.
Any subsequent rule that might match that email will not be evaluated. that’s primarily what the message is telling you. The order of rules is important, and its logical that no rule can do anything more with an email once its been deleted, so once the rule is matched, it must either be the last one in the list, or the rules after it have to be skipped.
All the rules still remain active though, and when a new email comes in, they will process it until either reaching the last rule, or hitting a stop.