Why is it called "sheltered instruction?"

neither can I.

Sheltered instruction means having a classroom for English language learners that is separate from the mainstream classroom. In these sheltered classrooms teachers make a few adjustments, i.e. avoiding idioms and providing support. In this way it is sheltered.

The quote you posted is simply saying that the curriculum, and the difficulty level stays the same.

I've not heard the term either and Max could be right.

It might also mean that context is rigorously controlled. In the usual ESL classroom, the students were/are often left to figure out the context for themselves.

One problem with uncontrolled context is that students have a much more difficult time absorbing the language. When they have to imagine a context for language their brains are not focused on language.

Create pointed and clear context and the mind naturally focuses on language acquisition. It comes as naturally then to second language learners as it does to native children in play.

Another problem this causes is the misapplication of language to context that students imagine for a particular language use/structure/collocation. Students often think of the language in a context that's described by their mother tongue; this is almost always misleading for the target language.

Or students fail to grasp the wider implications of a particular language structure/collocation. A good example of this is 'will' which is often described as the future tense of English, which, in and of itself is false, but it also fails to highlight the many other uses of 'will'.