Nickel does not generate Terraform. It is simply a language. The idea is that projects like Terraform could use it rather than create their own language out of a mess of JSON files.
In that sentence, I believe their meaning is that Terraform's language is already capable of generating configuration, and in fact this is a feature which is quite essential to Terraform's use. They acknowledge that all these projects (Nix, Terraform, Bazel, etc) already utilize relatively sophisticated programming languages for configuration. Nickel merely aims to be a better designed language for the purpose.
In that sentence, I believe their meaning is that Terraform's language is already capable of generating configuration, and in fact this is a feature which is quite essential to Terraform's use. They acknowledge that all these projects (Nix, Terraform, Bazel, etc) already utilize relatively sophisticated programming languages for configuration. Nickel merely aims to be a better designed language for the purpose.