I used to take it literally. Sturdy fences marking the boundaries keep healthy
distances between neighbors so that they don't intrude on each other. Easy-peasy.
But recently, I saw it used figuratively in the local "Buy Nothing" Facebook
group:
Good fences make good neighbors" as the saying goes. While we don't want to
build barriers, respecting boundaries is essential to forming positive
relationships...
The OP went on to talk about common-sense rules for interaction, e.g., "wait for
confirmation/consent before showing up to someone's home."