A self-directed IRA allows you the investor to choose with or without advisory intervention the investment you want to make. Custodians like Vanguard, Fidelity, Charles Schwabb allow you to invest within a pool of securities such as mutual funds, stocks and bonds. So there is a defined boundary for investments.
A truly self-directed IRA allows you to invest in virtually any asset (for example real estate) but the custodian must allow that asset and it purchase and management methodology to be within its policy. The problem is that you may call several different custodians and get several different answers to the same question. This is because the person who answers the phone is limited to the education that the custodian has provided and is only allowed to relay that information. Unfortunately, the agent will not say it is policy but they will make it sound like code.
The ultimate way to be self-directed is to use an advisory group that specializes in that area and provides you with checkbook control of your funds. This method gives you the most control, highest returns and lowest fees.
An authority site on the sunbject is http://www.myrealestateira.com or http://www.assetexchangestrategies.com