Good question. I suspect that back in the dim and distant past, we wouldn't have to ask ourselves this question, because you started a new draft when the old draft was so covered in deletions and emendations that you had to re-type it...
I think that agent's trying to sift out the people who think that when you've sat down and typed out 305 pages, you've written a book.
For myself, I do think in drafts, because I always work forwards through a novel, with a very clear idea of what the job is, this time. (which doesn't mean I don't tweak things as I come across them.) So my process goes like this.:
1) longhand and shitty results in 1st Draft:
2) typed up chapters - I type at the end of each chapter (there are probably only 10 or 12) - do the most basic sorting out of all those balloons and interpolations and re-jigs. This is the 2nd Draft, and when it starts feeling like a novel.
3 go through on screen, incorporating all the pages and pages and pages of notes 1 and 2 have generated, and everything else that needs doing - can be quite radical re-writing, can be commas. This may involve toing and froing if a particular strand of a plot needs sorting out, but the impulse is always forward. 3rd Draft
4) print out, read aloud and mark up, incorporate all the results of that. 4th Draft
That's probably the one I'll send to my trusted reader, who these days is my agent. I'll be thinking that it's more-or-less there: she may disagree, in which case I'll repeat 3) and 4) as necessary...
This is relevant:
http://emmadarwin.typepad.com/thisitchofwriting/2008/07/fiddling-hangovers-and-the-paris-review.html
Emma