light meter measurement: incident light and the inverse square law

As I understand it the inverse square law states that the intensity of light will diminish in value at a rate equal to the inverse of the square of the distance. My question is this: how can taking an incident meter reading of a subject be accurate without taking into account the distance of the camera from the subject?

Is the inverse square law only applicable to sources of illumination but not reflected light? This seems counter-intuitive but is the only way i can think to reconcile this apparent discrepancy in my head.