The hadith is in Kitab al-Salam of Al-Bukhari:
It was narrated from 'Uqbah ibn Amir [radiyyallahu anhu] that Rasulullah [sallallahu alaihi wa salam] said: "beware of entering upon women." A man from among the Ansaar said, " Ya Rasulullah, what about the in-law?" He [sallallahu alaihi wa salam] said, " The in-law is death."
When I have heard this interpreted before, it seems most scholars use it to refer to the importance of showing modesty and keeping separation from brothers-in-law in particular because of the potential for improper romantic relationships or temptation. In fact, most of the scholars I've read who addressed this emphasized the importance of not having brothers-in-law living in the same house. They didn't emphasize separation from parents/parents-in-law.