What they probably do is lower the excitation on the generator, without lowering requested engine speed (input).
In normal operation, when you notch down you reduce both requested speed for the engine and excitation on the generator, and I guess this would be like notching down without changing the prime mover speed.
So what happens is the generator is making less load on the crankshaft but the speed is the same, and thus you have lower hp and lower fuel consumption.
If there are advantages over real notching down, I guess they are minor, and have to do with different efficiency of the prime mover at different notches and fuel mixture ratios.
This is all a wild guess.
But there is nothing strange about the idea of "variable hp engine", every governed diesel engine has variable hp. It's just that in a locomotive the prime mover is constantly loaded at full load, so you don't see changes in hp normally.
But in a diesel truck, your hp is not always say 300 hp. It depends on the load.
Say you are spinning the engine at 2000 rpm in the truck. If you are pulling a heavy trailer , you are probably making maximum hp (in this case 300hp which is bhp rating of your engine)
But if you are bobtailing at 2000 rpm on flat road, your engine is not making 300hp at all, but probably around 100hp or even less.
Unlike gasoline engines, where the accelerator pedal is not a speed request input, but rather direct control of torque, at least in theory.
(that's why you can't put the pedal to the metal to an unloaded gas engine), diesel accelerator pedal is a speed control device, the torque is controlled by the governor.
That's what governor is for. It does the job for you. You just request engine rpm with your pedal, and he provides the power to reach that rpm.
That power varies from unloaded idle power to maximum rated hp of your engine.