That's right, with the old rules, each defender had to be guarding another player, and not a zone. For example, this would prevent Shaq from just camping out under the basket on defense. In addition, you could not double team a player without the ball, so for example this meant you could not stick two guys on Shaq before he got the ball.
With the new rules, there is no longer an illegal defense violation. Players can defend a zone, and can double team anybody they want. At the same time though, a new rule was implemented--the defensive three-second rule. This rule says that a defensive player in the lane has to be actively guarding someone within three seconds. They define this as being within arms reach of an offensive player. This still prevents someone like Shaq from just standing in the lane when nobody is there. So a true zone defense is still not allowed.