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It lies. It's taking lessons from the Lying Character Screen.
You do not lose xp when killed by a player. Only a monster.
__________________ Salute, guys. ~ Often here but not logged in.
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From the Arreat summit (you can go read this if you want to, it's under Basics -> PVP)
"If you are killed by another player (PKed), your character does not drop the gold being carried, but instead drops the amount of gold that would be lost if you had been killed by a monster. This prevents a player killer (PK) from taking the gold you are carrying. Of course, in this case the gold dropped comes from your stash too."
From the Arreat summit (you can go read this if you want to, it's under Basics -> PVP)
"If you are killed by another player (PKed), your character does not drop the gold being carried, but instead drops the amount of gold that would be lost if you had been killed by a monster. This prevents a player killer (PK) from taking the gold you are carrying. Of course, in this case the gold dropped comes from your stash too."
Your quote says: you don't drop gold you carry, you drop gold you have in stash as if you were killed by a monster. How is this preventing the other player from taking your gold? The gold is still dropped! You still lose gold (even from the stash). Yes you could just carry all your gold, but it might not fit in your pockets.