What does this road sign indicate?

You answered correctly. This traffic sign with a red border and a white center means "No entry for vehicles" (Verbot für Fahrzeuge aller Art). It indicates that no vehicles are allowed to enter beyond this point. It does not mean to drive at walking speed or only as a resident—entry is prohibited for all vehicles except for specially permitted exceptions which would be stated on an additional sign. Always follow this sign to avoid entering restricted areas.