What this guideline means in practice
Guideline 5.3 sits in Apple's Legal section. Apple treats gaming, gambling, and lotteries as regulated, and says to expect a longer review if you include them.
The parent rule is the frame. The specific bars are the four rules under it: the developer must sponsor the contest (5.3.1), official rules must be in the app and must say Apple is not a sponsor or involved (5.3.2), In-App Purchase cannot buy credit or currency for real-money gaming (5.3.3), and real-money gaming or lotteries need a license, must be geo-restricted to licensed places, and must be free on the App Store (5.3.4).
Skill-based games with no prize, no sweepstakes, and no cash-out are outside this rule. The moment a user can win something of value, enter a drawing, or wager real money, 5.3 applies.