iOS5 - "“Remind me to call Mum when I get home.” - How does it know when you're home?
You've got it exactly right.

In the video, the person had set up the phone to recognize 'home' as a specific address. iOS 5 uses its location features to determine when you arrive at the address of 'home' and alerts you when you do.

This feature can also be used to trigger alerts when you leave a place: "Remind me to pick up the groceries when I leave work."