Proxy Arp/Subnets

I was reading a Proxy ARP paper from Cisco and in the example there were two computers (among others) that were configured as such:

Host A: 172.16.10.100/16
Host B: 172.16.20.200/24

The paper said "Host A believes that it is directly connected to all of network 172.16.0.0"

Does this mean that the 172.16.0.0 /16 network can communicate to any 172.16.x.x network? (x.x being numbers). I always thought of 172.16.0.0 network being different from 172.16.20.0 /24. Is this not the case because this addresses is subnetted?

Host A: 172.16.10.100/16
Host B: 172.16.20.200/24

Subnet 172.16.10.100 /16
having the subnet block from 172.16.0.1 - 172.16.255.255, so the HostB's subnet also included on this. Hence obviously Host A can communicate with HostB. As well as from HostB's point of view the network Address will be 172.16.20.1 and Bradcast will be 172.16.20.255 so the traffic wont go beyond this.

I think what confuses me is why they say the subnet determins which part of the IP address is Network/Subnet and which is host portion.

This to me would put Host A on the 172.16.0.0 network and Host B on the 172.16.20.0 network making them on different networks. I guess the subnet determines which IP range it is in?

Does the communication work in both directions? So, any subnet of 172.16.0.0 can communicate to any other subnet of 172.16.0.0?

I thought the point of subnetting was to get more networks/hosts...

It helps to remember that the subnet mask is applied on a node, so if Host A's address is 172.16.10.100/16 then Host A thinks it is on the network 172.16.0.0 and so, as far as host A is concerned, anything with the address 172.16.x.x is on it's local network. Host B (172.16.20.200/24 ) will have a different opinion because the key is to consider which host you are sitting in and looking out at the world from

So, with that being the case, does that mean Host B is on a different network than Host A? and Host B could not communicate to Host A? But, Host A can talk to Host B?

Host B is on a different network to Host A from Host B's point of view, but not from Host A's point of view. From Host A's point of view they are on the same network. The outcome all depends on the mask set at each node