Bitcoin Unlimited is proposing that full nodes and mining nodes decide the blocksize settings for themselves from among BIPs or their own custom configuration, with Bitcoin Unlimited being a vehicle for doing that more conveniently (users don't have to mod the code themselves).
The idea is that users would converge on a consensus Schelling point through various communication channels because of the overwhelming economic incentive to do so. The situation that results would be no different than now except that there would be no reliance on Core (or XT) to set what the options are. Bitcoin Unlimited, as software, constitutes a meta-proposal that rejects the idea that it is the job of Core (or XT) developers to govern policy or available policy options on blocksize. Bitcoin Unlimited would relegate developer-led BIPs to the status of mere recommendations.