Yes, that's precisely what it means. In particular, if $\gamma$ is a path from $x_0$ to $x_1$ then the isomorphism is $\gamma$ itself. If $X$ is path connected, then there's one isomorphism class and $\pi_0(X)$ has it's usual definition, since a group is just a groupoid with a single object.
Edit: So I noticed that I actually made a bit of a mistake above; I mixed up notation. Here is what $\pi_0$ and $\pi_1$ are typically defined as:
$\pi_0(X)$ is the set of path components of $X$
If $x_0\in X$, then $\pi_1(X,x_0)$ is the group of homotopy classes of loops based at $x_0$, and in particular if $X$ is path-connected then we call this $\pi_1(X)$, because the base point $x_0$ does not matter.
I never took a course that specifically used the "groupoid" approach , but it seems that the benefit in that it gives you sufficient generality in that you can recover both $\pi_0$ and $\pi_1$ from the groupoid (hence the notation $\pi_{\le1}(X)$).
That is, if we define $\pi_0(X)$ to be the isomorphism classes of $\pi_{\le1}(X)$, then this is just the set of path components, because any path is an isomorphism as we mentioned above. So this agrees with the first definition. And if $x_0$ is a point of $X$, then considered as an object of $\pi_{\le1}(X)$, we can define its group of automorphisms to be $\pi_1(X,x_0)$ (which matches our previous definition again. If this is not immediately clear, think about why this is!).
And in particular, if the space is path connected, then all points are isomorphic, and $\pi_1(X,x_0)\cong\pi_1(X,x_1)$ (where this isomorphism is conjugation by $\gamma$ for any $\gamma$ connecting the points) for all $x_0,x_1\in X$, and we just call this group $\pi_1(X)$.