It is not stated, but I assume that you peel the onions?

You could, but it probably isn't necessary. Whenever I bake onions in the oven, I put them in a casserole dish with the skins left on and the tops and bottoms cut off; when the onions are ready to come out, it is easy enough to squeeze the cooked onions out of their skins and discard the skins. In this recipe, if you leave the skins on, I assume that you could squeeze the skins off when you remove the onions from the muffin pan.