The author of the blog post was trying to make a point about how the Agile Manifesto emphasizes "working software over comprehensive documentation", and that when you do this, you risk losing the information about how software is supposed to work.
What's needed, whether it's Waterfall, Rational Rose, Agile, or some other SDLCM, is a "statement of purpose". It is some textual description of what is to be done, and why, at a detail level fine enough in the right areas that a developer can take this description into the team room as his "requirements", and produce correctly-behaving software as a result of his development efforts, guided by whatever methodology he or his team or managers see fit to follow.
In Waterfall, this is the Requirements Document. It's all defined, in detail, up front, before development begins, and if it changes while the project is out for development, development stops and the team reverts to the "design" phase.
In UML/Rational Rose, this is a "use case narrative". It describes what the "actor" (a person in a specific business role, or an external automaton such as another program) will do that should trigger some action, and what will happen within the system as a result of this action.
In Agile, this is a "user story", the exact form of which can differ depending on the exact flavor of Agile, but the two I've seen are similar to a UML "use case narrative" and a slightly different approach: "As a... I want... so that...". Similar to a use case in that the actor and the basic action are mentioned, but the addition is an integration of the business need into the context of the story, so when designing the solution, the development team can keep the business need in mind.
None of these is a "readme", and frankly I wouldn't want to read a readme that was written in the way the blogger suggests; it will be long, it will be ordered only according to the order in which the developer added the requested features, and it will be written by a developer, who will have his own perspective on what he's adding or changing and why that may not coincide with the perspective a user would have.