It means the person is allowed out of prison "on parole", which is normally a fixed term (usually the remainder of their sentence), but their licence is for life. Yes it does mean life and they face the threat of immediate recall to prison for the rest of their lives. The terms normally include the standard ones for parole; no association with known criminals, no further offending, regular reporting to a police station, etc and may include specific terms such as in this case ... the conditions of their licence included a ban on them contacting the Bulger family or each other, or visiting Merseyside without the written consent of their probation officers. It is still not sure which of the conditions were breached.
Life licences are not commonly used as most criminals are detained for "life" or a specific term so the license will be only for the remainder of their sentence ... "life" not actually being a life time usually. In this case, the boys were detained "without limit" (although they won a ECHR case to restrict their minimum sentence). I suspect they were given the indefinite license as a condition of them having protection of their anonymity for life once they were freed with new identities.