I'd like to take this quote apart and explain its meaning to me.
The general idea is someone develops an idea, something novel and interesting, and creates something new. Someone else, the great artist, comes along becomes familiar with the original idea, groks it, realizes how to bring it to the next level, and is able to create a product that is so much better than the original creator, that the original is a forgotten footnote. At that point, the idea has been stolen by the great artist who understood the idea better than its creator.
Example, via my brother James, at one point opera was invented and its practitioners busied themselves taking this interesting concept and making operas of varying quality, and everybody was pretty happy with what they were doing and congratulating themselves for creating this new art form. And straight out of Amadeus, Mozart came along and revealed what came before as primitive. Mozart and taken the basic idea of opera and made previous attempts obsolete. He stole opera.
Example. Smart phones existed before the iPhone. The idea is pretty obvious, and Microsoft worked at cramming Windows into a handheld device and were happy enough being the leader in a niche market. Along came Steve Jobs and his team, they thought deeply about the idea of a handheld computer and came up with a design that revealed previous attempts as clumsy, ill thought out toys. They did not try to copy Microsoft by jamming OS X into a 3.5 inch screen. Instead, they stole the smart phone.
I asked—a really quite good—programmer and colleague, "Who invented the smart phone?" He told me "Apple".
The lesson to me is we should strive as creators not to just blindly iterate on each other's work, but to look for our moment, our flash of understanding when we too can steal an idea and make it our own. I'm still looking; someday.