The IRS frowns on calling that kind of arrangement a 'contractor' ... basically, that kind of thing has been abused, so it's worth it to everyone to make you a W-2 employee.
If you're going to sit at their desk, use their computers, etc., you're an employee. Whose employee, that's up for negotiation. But you basically can't be a contrator in the 1099 sense of the word. So these companies run an outsourced HR, and some companies won't do things any other way.
As to the wording, they bought someone's HR-in-a-box templates. Enjoy the faux flattery :-)
/jordan