Yes. It can mean "she leaves" (the house or the room) or that she is is going to town to amuse herself (theater, cinema, eating etc, but not shopping). "Å gå på byen" ("Hun går på byen") is a fixed expression that also means to go out to town for amusement.
I believe that UT is used to describe the direction of movement "Jeg går ut" (i M going out), whereas UTE is used to describe stationary state "Jeg er ute" (i am outside).
Similarly to this, there is hjem/hjemme.