When truing a wheel the theoretical state of perfection is when there is precisely zero side-to-side wobble, in other words the caliper on a truing stand would just touch one side of the rim for an entire rotation, while the caliper on the other side would just touch the other side of the rim for an entire rotation. In the real world everything comes down to tolerances, a level below which you regard the wheel as being acceptably close to perfect to stop fiddling with it. How close to perfection is acceptable depends on how much time you're willing to spend on it and/or how much money you're willing to pay someone else to spend their time on it.

1/16 of an inch is 0.0625" (~1.6mm); 1.32 is 0.03125" (~0.8mm). I'd assume what the seller is describing is a wheel where if you adjusted the caliper such that it just brushed the wheel at one extreme, at the other extreme it would be up to 1.6mm away from the wheel.

I've ridden wheels that have been out of true by far more than that when I've had broken spokes (I broke a spoke 3 miles into an 82-mile ride, and for the remaining 79 miles had a wobble in the wheel that was easily 1/8" if not closer to 1/4"). It's not an ideal situation - if the wheel wobbles too much it rubs the brakes and that really makes getting anywhere hard, and a wheel badly out of true will put more stress on the spokes than a properly trued wheel. When I built my first wheel I was aiming for an accuracy that I'd estimate as being within 1mm or less, and was trying to gauge 0.5mm as best I could by eye (that's roughly 1/64") by trying to judge when the gap between the caliper and the caliper reflected in the rim was about 1mm. If the wheels seem good and the price is good I'd have thought you could pop them in a truing stand and get rid of that slight out-of-trueness.