They are, according to Israeli law citizens of Israel. The author is speaking about Palestinians that live in the West Bank and Gaza. A simple example of this is road 443, which was built on privately owned Palestinian land and runs right through the West Bank. Unfortunately, due to the apartheid laws, these same Palestinians are hardly ever permitted to use it and must use longer detours.
Police disperse hundreds in brawl in Kafr Manda, northern Israel (Haaretz)
from the article: Heading toward an Israeli apartheid state