Extension Privacy Setting - Ambiguous

What does this extension privacy setting actually mean and do?

This can read and change site data: When you click the extension.

I assumed it prevented extensions from 1) reading page contents (except when clicked) and 2) collecting my browsing activity across any/all pages (except when clicked). But now I’m wondering if it only means #1, and not #2? IOW, even when this strictest of settings is active, can the extension still collect any/all browsing activity?


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