What is a "Hall" sensor, and what is it used for? On Google's specs page for the new Nexus 5, the Nexus 5's built-in sensors are listed as:


  Sensors
  
  GPS
  Gyroscope
  Accelerometer
  Compass
  Proximity/Ambient Light
  Pressure
  Hall


(Click "View Full Tech Specs" to see that list)

Looking up Hall Sensor on Wikipedia, it seems to be some sort of magnetic sensor, but it's not the compass because that's listed separately, and none of the example uses on the page seem to make much sense for a smartphone application.

What is it, and what is it useful for?
As you've found out, a Hall sensor detects a magnetic field. It could be that in this case it's referring to a sensor for a magnetic cover, like those in the Nexus 7 and Nexus 10. Such sensors detect the proximity of a magnet embedded in the cover or case for the device, in order to automatically turn the screen off when the cover is closed.

That would be unusual, as that kind of magnetic switch is usually a simple reed switch, which wouldn't normally be described as a Hall effect sensor. A Hall sensor would give more data about the strength of the magnetic field, which could be used by software to detect the opening or closing of the case more reliably. However, I've not seen any claim that the Nexus 5 has such a switch anyway, which is much less common on phones than tablets.

Another (just as far-fetched) guess is that it's related to the wireless charging capability. It could be that the Hall sensor is specifically there to locate the wireless charging point in relation to the phone's position.