"proper" exposure (you might want it to be brighter or darker) is determined by a gray card being exposed as middle gray in a scene. some objects give the same reflectance as a gray card, and I believe a blue sky (away from the sun) is one of those things, as is green grass.
built into your camera is a reflective light meter. when you start metering, usually by half-pressing the shutter button, an arrow shows up in the viewfinder and points at some value on the meter. if you are using an auto mode (P, Av or A, Tv or S), it is set to 0 by default. in other words, it meters the scene so that the region you are metering will be exposed as middle gray (this is assuming you are using partial or spot metering). in manual, you have to vary your f-stop or shutter speed to put the arrow where you want it to be.
so what Peterson means is that he pointed his camera meter at the blue sky with the shutter set to 1/500. since the sky has the same reflectance as a gray card, he knows for a proper exposure, he needs to center the arrow on the "0" on the metering scale. to do that, he either stopped down (if the arrow was above 0, i.e. overexposure) or opened up (if the arrow was below 0, i.e. underexposure) to f/8.
the same idea applies if you know the reflectance of any other object or surface. for example, caucasian skin is usually ~1 stop brighter than middle gray. so if you are metering off a white person's skin, you would place the arrow at +1, either by using exposure compensation in the auto modes or doing it yourself in manual.
center-weighted average and evaluative/matrix metering act a little differently than partial and spot, so the above method may not work. center-weighted does what it sounds like - it averages the scene to middle gray, but biases the calculation to the center. to have the above method work using CWA, the whole frame must be filled with the sky, rather than just the middle.
evaluative/matrix metering takes the exposure data from the metering zones and active AF point, goes through a database of scenes, guesses what the scene looks like, and selects an appropriate exposure. this mode might not work with Peterson's method...as in I've never tried, so test it out yourself if you use it.
