All modern operating systems can be thought of as a layer cake. The lower the level the closer it is to the "hardware". The kernel is in the lowest levels, & it's whole job is to talk to the hardware on your phone, and facilitate some of the software infrastructure needed by the layers above it.
User space is the upper levels, & it includes any applications you may be running. It also includes most of the visual things you interact with on a PC or a phone. When we talked about the launcher the other week, thats also part of user space.
A exploit, is a security vulnerability that an attacker can use to gain a foothold on your device. Usually if the exploit is with a piece of software that is "lower on the cake" it is more severe, & kernel level exploits are often the worst kind.
I believe GrapheneOS is cautioning you about a scenario where you may still receive security updates (AOSP user-space patches) to plug those security holes; but not any patches to the kernel or lower levels.