It does both. Black border alone marks the default button in the dialog (unless another button is focused), black border + dotted outline marks focus.
I double checked in a VM running Windows 98 earlier today. I suspect some of these 9x recreations are based solely on screenshots, in which details like active and focus states are not obvious.
* Thick black border indicates which button would be pressed if you hit enter. This is the focused button, or the default button if no button currently has focus.
* Dashed border indicates which button or other control currently has focus; this button is pressed if you hit space (but if another control has focus then space does not press the default button).
This is what they're supposed to look like: https://imgur.com/a/iFMJCER (98.css on top, Windows 98 below)
As far as I'm aware, the only buttons that look like that when pressed are the Start menu button and taskbar buttons.
Similarly, buttons are supposed to have a black border in addition to the dotted outline when they're focused.