In simple terms Thai people who transition from one sex to other still have all their official documents (ID Cards, DL, Passports etc) showing their sex at birth!
They are just asking that their documents reflect their current sex status.
I am assuming that this will only be applicable to those who have undergone a full medical transition and not for those who just "declare" a transition!
A member of the wife's family suffers from this as she looks and acts like a female (after the full male to female operations) but her ID card etc show her as Mister and it cannot be changed!
She has had problems with this when travelling.