Typically, a Forth interpreter will read an entire line of text into a buffer called "the input buffer" and will then scan that buffer, breaking it down into words which it either executes or compiles. Because Forth machines are often quite low level and lack fully dynamically allocated memory, it's hard for an implementation to read a line of arbitrary length so the input buffer is usually a fixed size and that represents the maximum line length (ignoring such modernisms as UTF-8 for now).
It seems that LaForth, instead of waiting for a new-line, merely waits for a space and so executes/compiles each word as it is typed in and does not wait for the end of the line. There's still a buffer, but it is quite a small buffer. Word size is constrained but line length is not.¹
It seems like a nice approach and probably leads to a simplified parser. but there are some issues. Ansi Forth more or less assumes that the input buffer exists and so includes words that can be used to manipulate it in various ways. I don't see how these words (which are considered standard) could be implemented in LaForth.
¹ This is described in section 1.3.1 of the LaForth book.