I tend to be decent at sight-reading sheet music. I'm not particularly good at playing by ear or improvising, though I'm reasonably decent at riffing on guitar chords if I'm not playing the melody at the same time. A better pianist would be able to sight-read the melody while improvising on the chords.
I'm not aware of a term that summarizes exactly what you're doing, but the first rule of sight-reading is not playing every note. If you say you're good at sight-reading when you're playing the melody and riffing the chords, you are performing as advertised. The only ones who would be mistaken are those who have unrealistic expectations.
You pick out the most important part and make sure you get that. Many of those I know who sight-read play hymns at church. If it's an unfamiliar piece to them, i.e., they haven't played it much before and don't have muscle memory to help a little, they will either play the treble clef or play the soprano line and octaves on the bass line. With each repetition, they will add written notes where they can (S/A players adding the bass line and then the tenor, S/B players adding the inner harmonies one at a time).