It is a little confusing, but it technically makes sense. When you disable the built in display, that display controller can be used for a second external display. It would be nice if you didn't have to actually close the lid to disable that display since some people would like to use the built in keyboard with 2 external displays.
M3 Macbook PRO doesn't support 2 monitors even with laptop closed. This is why it's confusing. M3 Air does but M3 Macbook Pro (for 'professionals') doesn't.
• M3: 1 × fully hardware-accelerated external display
• M3 Pro: 2 × fully hardware-accelerated external displays
• M3 Max: 4 × fully hardware-accelerated external displays