Yes, generally that's what Frank's saying.
The way I think about it is: Your terrain tab will be like your main rock/mountain structure. Once that's been run through 'compute normal' the 'shaders' have now got a baseline 'normal' to build on. You make the mud sit on top of rock, grass sit on top of mud, etc. Any displacements, negative or positive, after the compute normal node are extra, and above/below(

) the final shape of your landscape that's specified through your terrain displacement shaders.
You wouldn't want to use the compute normal for the 'terrain' input of populations if you had extra layers in your shaders tab applying displacement.(it defaults to 'compute normal' as the population's 'terrain shader'. You need to manually change it.)
If you have 0.5 metres of displaced mud on top of your rock and you lay grass down as a pop' you'd want to use the mud layer(for example) to lay the grass on, not the terrain normal anymore(because it's now 0.5m beneath the mud).
Hope there's some sense in there, I tend to blether. ^^