焗 as used in Cantonese means "to bake" in the most general sense of the word. The method of baking you quoted in your question appears to describe specifically to how the Hakka/Cantonese dish 鹽焗雞 ("salt-baked chicken") is prepared, rather than the meaning of 焗 in general, which is simply a method of cooking by surrounding heat. For instance, the word for "oven" in Cantonese is 焗爐. The word can also be used to describe baked cheese dishes for the simple reason that they are baked in an oven.
The character itself appears to be a relatively recent invention since it does not appear in dictionaries such as 《康熙字典》. It was invented by adding the 火 radical to the character 局, which shares the exact same pronunciation in Cantonese (
guk6). As for the etymology of the word, I found several sources indicating that it historically should be written 焅, which does have an entry in 《康熙字典》 that cites definitions referring to dry or hot air:
In modern Cantonese usage, the word can be used similarly to refer to hot and stuffy air. The meaning "to bake" was probably a logical extension of this original meaning.
I found this post on a forum that quotes an entry in 《追本窮源：粵語詞彙趣談》 with more details:
For the benefit of the general audience, here's my own English translation of the entry:
焅, now commonly written 焗, originally meant "hot air", referring to extreme heat. Its usage to describe a cooking method is attested by Song Dynasty records. 焅 as a cooking method now includes two meanings: (1) using steam in a sealed vessel to heat food, for example, "baked rice"; (2) sealed baking, for example, "baked sweet potato", "salt-baked chicken", "cheese-baked lobster". Of these, "cheese-baked lobster" is a Western dish. 焅 can be seen as appropriately describing both Chinese and Western cooking methods.
From 焅's original meaning of hot air, its meaning is extended to hot and muggy weather, for instance: "Today will approach 38°C, the weather is very muggy (焅)." In addition, it can be used to describe the effect of air in a room that is stuffy and not well ventilated, for instance: "The room's windows haven't been opened; it's suffocating (焅死)!" Also, 焅 can mean "to compel" or "to be compelled", for instance: "He doesn't like cauliflower; don't compel (焅) him to eat it." "As the stock market continues to fall, I'll be forced (焅) to liquidate." 焅 in the former example was used to mean "compel", and in the latter used to mean "be compelled."