What does “a separate peace” mean, and how does it apply to the novel?

The novel is set during World War II, but the teenaged boys at the boarding school are kept cocooned, apart from that war. They know it will face them soon enough, and they both want to be part of it and dread it.
A separate peace can sometimes occur when a nation has an alliance with another nation to back it up in case of war but then decides not to get involved. Let's say nation A goes to war with nation B. Nation C might have an alliance with nation A to support it in a war but may nevertheless make a separate peace with nation B and stay out of the conflict.
The one mention of the term "separate peace" occurs in chapter 9:

It wasn't the cider which made me surpass myself, it was this liberation we had torn from the gray encroachments of 1943, the escape we had concocted, this afternoon of momentary, illusory, special and separate peace.

Even though Leper has joined the army, Gene and Finny, at least for the moment, can act as if they live in a separate world, one that seems peaceful despite the world war. This also alludes to the peace they have made between themselves. As Gene notes, it's an "illusory" peace.