This note, in my interpretation, doesn't make any sense if you have a tolerance block that is giving a tolerance based on, say, number of decimal places shown. We had this note on the block, and we also had a tolerance block. The thing is, the tolerance block is for the stated purpose of of providing tolerances to otherwise not-toleranced dimensions.
I still use a tolerance block on a drawing sheet, but removed the note. I use tolerance block tolerances on dimensions for features of size only, and use explicit basic dimensions (dims with the basic box around them) for location dims or any other dimension that is toleranced without using the tolerance block.
As far as interpreting the drawing you have, it's my understanding that the tighter tolerance wins. And I say that only because that is how I understand the standard, which does allow, for instance, profile of a surface with an "ALL OVER" symbol to basically establish a worst-case variance of an entire part, to co-exist with refining tolerances that establish tolerance zones within the tolerance zone of the all-over control. Very likely that is not what the designer is thinking, he is probably thinking a geometric control overrides a block tolerance always, but the use of the "UNTOLERANCED DIMENSIONS ARE BASIC" note on his drawing has allowed ambiguity into the interpretation of his drawing.