I completely fail to understand the statement
It is not really necessary to understand it. It is a fact that you must respect. Like Ohms law or gravity.
I mean pins 50 to 52 are not connected to the shield. So how can these pins be used by the shield?
Not directly, but indirectly, through the ICSP header, they are.
Does this mean I can not use pins 50, 51, and 52 of the mega when I use SPI?
You are using them. For SPI. You can't also use them for other purposes.
As pins 11, 12 and 13 on the mega are PWM pins are pins 50 51 and 52 PWM pins?
if pins 11, 12 and 13 are PWM pins and replaced by 50, 51 and 52 do I lose the PWM functionality?
I don't understand the possible cause and effect you have outlined here. The ethernet shield on the Mega does not use pins 11 to 13. Therefore, there is no loss of PWM functionality.