Yes. That's exactly what it means. At least until one of the species develops superluminal travel. A great example of this phenomenon is demonstrated in the movie "Contact". Radio transmissions from Earth have been sent out since the 1940s (or earlier) and reached into space. Assuming that a sentient, space-faring species lives in the Proxima Centauri system, they'd be watching our TV from ~4 years ago. And, if they were broadcasting into space, we'd be seeing their emissions from ~4 years ago.
Even a time span as short as 4 years only allows us to detect whether life is present or not as of 4 years ago. And "life" has a very large definition. Single-cell life, for example, is impossible to detect with current technology at distances as short as within the solar system. Sentient life should be easier to detect, based on implications that it would radically alter its' environment to suit its desires, but even keeping that in mind, it would still be very difficult to detect for a number of reasons, not the least of which is the time factor (energy dispersal over those kinds of distances is another major factor).
We could, however, see life that existed a long time ago, if we developed sufficiently high-resolution imaging (still a long way off) AND either a) they altered their environment to suit their needs OR b) they were broadcasting recognizable signals into space. The key to that last point is the "recognizable" part. For all of our science and understanding, it is entirely possible that a sentient species could develop without capitalizing on communication methods that we take for granted, and we would therefore be unable to detect even if they were (metaphorically) screaming in our direction.
And yes, looking out means means looking back. Good insight.