I'll let someone who is well versed in club building give you a more technical explanation. But in short, he has a 3/8 of an inch difference in each iron length, instead of the "standard" 1/2 inch between most irons.

3/8 stepping is not referring to shafts but rather to length. Normal length gaps is 1/2" instead of 3/8"...

This will allow one to have slightly longer clubs and be more upright taking pressure off one's back and spine theoretically...

It is one deviation, another is the same length shafts for all clubs...

Regardless of what one chooses, if you like it go with it!

So if they originally came from Titleist with the s300 shaft and a 1/2 degree flat and he put the x100 shafts in and did the 3/8 progression would the lie angle change? And what does the 1/2 degree flat mean?

Not sure if you ever got your answer, but here it goes. 1/2 deg flat is referring to the degree of angle between the shaft and the sole of the club a flatter lie angle has a grater angle meaning that the toe ends up closer to the ground by half a degree. This is changes ether flat or upright depending on what turf interaction you would want, heal or toe or middle of the sole makes contact first. Changing lie angle can alter ball flight as a more upright lie angle will cause the face of the club to rotate shut quicker causing more of a draw where as a flatter lie angle will cause the toe to hit first which will drag and delay the turn over of the face promoting more of a fade.

Onto the 3/8" length progression. I am not sure why people are saying that you will end up with longer clubs as 3/8" is 1/2". if you start your 3/8" length progression from the PW and end with the 3 iron your total length for the 3 iron will be slightly less then 1" shorter then a standard 1/2" progression set. For some this makes the longer irons much easier to hit more consistently. shortening clubs do have some negative effects as the short the club the less speed generated at the club head there for reducing distance. That being said id rather hit the middle of the club more consistently then generate more speed as a middled strike will generate more ball speed then an off center hit.

Most iron sets these days are going to me Swing weight matched usually with a rating of D2 or D3 depending on the manufacture. going with a 3/8" length progression is an easy way to MOI match a set of irons so that all the clubs when swung would feel the same.

Length change = lie angle change - when referring to a 1/2" length progression set of irons for every 1/2" length change the lie angle also changes 0.5 degrees so yes the lie angles will change when going from a 1/2" progression to 3/8" progression. when you shorten a club you essentially make a club flatter in lie angle as you will be standing closer to the ball and the shaft will be more vertical which will cause the toe of the club to pitch down.