You're right, it's a bit confusingly worded. From the Games database it seems like he means Command Line, not Command Prompt.
Ripping off the Colin McRae Rally 2005 Multiplayer demo readme
from this url
To run the game with one of the options below, right-click on the desktop
shortcut to the game, and select 'Properties'. Select the 'Shortcut' tab.
In the 'Target' box add the following command (without inverted commas) at
the end of the line. In Windows 98, this means after the final inverted
commas. Note that command-line switches may not always be reflected by
current options in the in-game menus, even when they are active.
So yeah, command line. Add -WIDESCREENDISPLAY like it says there after the, um, inverted commas. That's not the clearest Readme either. But it should work. Inverted commas. Haha.