I believe this is more true with trees. The idea is you do not want mulch piled up against the trunk of the tree. If mulch is covering tree bark, the bark will stay moist and provide good conditions for fungi and bacteria which could cause disease in the tree. Also, the nitrogen in the rain that is responsible for "composting" the mulch, could also compost the tree bark as if it were mulch. You could actually compost an entire, small live tree if you pile enough compostable material on top of it and add nitrogen. All that is necessary is the right conditions of moisture, fuel (carbon), and nitrogen.
So to prevent things like this from happening, its standard practice to rake-back the mulch a number of inches from the trunks of trees. With pebbles, plastic, or rubber mulches, composting may not be an issue, but moisure and fungal growth would be.
Some plants, like tomatoes, you can pile dirt around the stems to initiate new roots to grow from the stems. Most trees won't behave this way and what you'd actually accomplish is to bury to roots under more soil and could harm the tree. But even with tomatoes, if you pile mulch too thickly around the stems, you still may compost (maybe digest is a better word... or rot) the stem. The green tomato stem is a good source of nitrogen. Lay a pile of wet dead leaves against it and there is a possibility of composting. So, its particularly important to keep dead, carbon material away from the living parts of plants.