Legal Separation is a status like Divorced.

You have to go through the courts again to be Divorced once youve become Legally Separated.

So are they legally separated by Court order? 

Or are they in they separated and in the middle of a divorce?

I have been told by divorce lawyers that "legal separation" is very rare. FWIW I've seen it once in 30 years. And I've had many clients who were separated. As Lisa said this is a legal status with legal paperwork.

My daughter and her ex have been legally separated for a few years....thats the only way she could stay on his health insurance.
He recently filed for divorce..I think hes planning on getting remarried.

There are states like California where the divorce does not become final until a certain period of time after the decree.  I think the delay also applies to decrees of separate maintenance -- and the IRS language is directed at situations like that.  I think I've seen only one "legal separation" decree in 45 years -- in a situation where the spouses wanted to keep health insurance coverage and survivor benefits from an employer.