He is talking about the two major competing cosmological models of his time. These include shapes of both heaven and earth.
There is the model of the spherical earth surrounded by a spherical heaven which he describes in this passage as: "heaven is like a sphere and the earth is enclosed by it and suspended in the middle of the universe." And there is the model of the flat earth with a dome shaped heaven which he describes as: "heaven like a disk above the earth covers it over on one side."
Since there wasn't anybody around then who thought that there was a flat earth surrounded by a spherical heaven, there is no reason he would be mentioning that possibility. A spherical earth in a spherical heaven was the dominant cosmological model of the classical world. Of course, that is the model he is talking about.
And we see elsewhere in St. Augustine's writing (such as his discussion of the antipodes) that he leaves open the option of the earth being a globe. He does not presume the earth is flat. On the contrary, the majority of scholars think that he himself believed the earth is a sphere.
There is the model of the spherical earth surrounded by a spherical heaven which he describes in this passage as: "
heaven is like a sphere and the earth is enclosed by it and suspended in the middle of the universe." And there is the model of the flat earth with a dome shaped heaven which he describes as: "
heaven like a disk above the earth covers it over on one side."
This description is 100% flat earth. We know this because other Fathers discuss it at length. First, the "heaven is like a sphere and earth enclosed by it and suspended in the middle of the universe" describes the dome above, with the flat earth in the center. Suspended in the middle is the terrestrial domain is proven because it says "heaven like a disk above the earth covers it over on one side." Which is the top side, or firmament, naturally. This describes a dome over the flat earth.
To say the majority of scholars think that Augustine believed the earth is a sphere is without merit unless and until Scripture is compared and a proper assessment is gleaned. Even if Scripture doesn't appear to be crystal clear (for some) the conclusions arrived at must never be at odds with It.