Here's what Elon is saying:
If you're going to use an active photon emitter 4mm is a good wavelength. 4mm is small enough that diffraction limits don't impact your ability to delineate features of interest but it's immune to rain and fog. At 4mm building a phased array transceiver doesn't require exotic technology and you can generate and process the signals with existing ICs - no need for gallium arsenide or indium phosphide active optics (which all solid state laser systems rely on). It has excellent range, wonderful scattering properties and zero natural background noise. You don't need "lenses" or moving parts on any scale and the underlying tech is very low power, requires only a few square centimeters of antenna, integrates easily into existing vehicle bodies, isn't sensitive to temperature variations (unlike lasers), and doesn't care if your car is dirty (also unlike lasers). Plus transmissions can be digitally coded to eliminate interference from competing sensors on nearby vehicles.
It's a great wavelength - much better than 700nm, or 1500nm. And best of all it's complementary to cameras in a good way. Any self driving system *must* have excellent vision. No amount of ancillary sensors will compensate for crappy vision. And if you need good vision then your backup sensor should be good in exactly the places where vision is weak. It makes no sense to have your backup sensor operate at the same wavelengths (optical) where your primary sensor (vision) operates. You'd much rather have your backup sensor be reliable in the most common environmental situation where your primary sensor is having problems - heavy precipitation. When precipitation is bad enough to make vision fail it's also going to make lidar fail. But mm wavelength radar is nearly impervious to precipitation.
My addendum: it doesn't have to be 4mm - anything from 1mm up to 10mm is pretty workable, but 4mm happens to be a good point today when you consider the FCC and the current state of IC tech. Getting into the THz range you run into absorption issues that limit range and the IC tech isn't there yet - anything bigger than 10mm and you don't get good resolution on small objects like cats and tree branches.