For me it's about letting them get on with it if they're pottering happily, rather than insisting they do things my way, so letting them make mistakes, letting them be a bit bored sometimes so they learn to entertain themselves, letting them learn that they aren't always the centre of my attention.
Balanced with other times when they absolutely are. So we will play board games, bake cakes, read together, etc. But we will also have times when I'm having a drink and they are doing as they please.
We camp in the summer. With friends. And they learn to go off with friends of a similar age, they have boundaries in the site, but generally they come back for food and then buzz off back to wheeling around the site, poking mud with sticks and wiping the sticks on wellies, seeing how close they can get to the pig pen before the pigs fart, wheedling pennies out of us for the ice cream cart, and just chatting, playing, having fun with friends whilst we grown ups e joy sitting in peace and having our own conversations.
It's about watching from a distance when a toddler falls over and letting them pick themselves up and get on with it (if genuinely unhurt!) rather than racing over to pick them up and making a bigger deal of the fall than it was.
About letting them have a corner of the garden for digging to China and not insisting they plant neat rows of sunflowers and courgettes (but letting them have the seeds to do that if they want to too).
I see it as letting them practice failing as well as seeing what they can do for themselves, which helps them to be more resilient adults, with a better idea of their share of the whole orange.
It's different from actual neglect - I'm generally aware of what they're doing, I'm available for emergencies, I'm enthusiastic and encouraging. I might leave them to cook for themselves or have a camp fire (not the toddlers!), but if it's disastrous, I will have back up food available, or suggestions for fixing it if they want my help.
So pretty much, not hovering. But helping when they want the help. And encouraging age and developmentally appropriate independence.