I don't know -- I'm torn. While I think the host should provide food and drink for a party, I do not necessarily think that the host needs to provide anything anyone could possibly want, and I don't necessarily think that they *must* offer alcohol. For instance, if the party host is hosting a party at a pizzeria and offers pizza/salad/soda , I don't necessarily think someone should expect the host to provide beer or lasagna just because the pizza place also sells those items. (I realize the party in question is at an upscale restaurant, not a pizzeria. I'm not sure if that changes my opinion. It would probably depend on the restaurant. If it was at a trendy microbrewery or something, then I guess I could see guests expecting the house beer or something.)
If the host didn't offer ANYTHING to drink, I think that would be a faux pas. I went to a wedding like that once. Cash bar meant there was NOTHING to drink, not even water, without paying for it.
I was raised that in a hosted situation, you take what is offered and say thank you. I would NOT order something beyond what is offered, even if I didn't really like it. However, maybe indicating that alcohol is on a cash-bar basis is letting guests know that it's not provided, but will be available, and the host won't be offended if guests buy their own.