He was talking about JIRAYA,and Itachi was telling a lie I think.If not,then the only reason why orochimaru lost to him is because of his carelessness and obsession for sharingan.
If it would be a all out battle Oro would've defeated him,but since he became careless,Itachi ,as tactical as he is,took the chance and cut away his arms,making him useless without any one of his Jutsu.So that must have made Oro change the body for the first time.But since those bodies were not his,even with all his jutsu and knowledge he didn't remain that strong as he was in his original body.Thus couldn't use sennin mode as well.
Well that's my two cents on the matter,but now I think he is back again to his original strength like he use to have before.