The DM must remember that it is important that the party get to the dungeon. Encounters that are obviously too strong for the group (especially if they have been weakened by previous encounters) should be reduced or bypassed—for example, the party might come across a predator's kill or war party's trail instead of the the actual monsters; or they might be able to sneak past a monster that is otherwise engaged. On the other hand, a very strong party might encounter up to double the number of creatures or more. In all cases the DM should match the challenge to party strength and to the general flow of the adventure.Basic D&D has some similar advice, but the text from N1 is notable in that A) it is even more explicit and B) it occurs in the first "beginner" module, ostensibly designed to teach new referees and players how the game works. N stands for "novice-level" and N1 was published in 1982. If this passage was found in a recently written module by someone like James Raggi or Matt Finch, it would be considered the rankest of heresies.
Personally, I prefer OSR distrust of predetermination and balance over the TSR advice. Why bother even putting numbers to challenges beforehand if you are just going to scale them to party strength? Why roll dice if you are not willing to live with the result?