They may be referring to IMAP's server-side search support. If the message isn't cached locally, the IMAP server can search the message headers, body, etc on the phone's behalf.
Yup, I believe that's what they're doing. The trouble with this approach is that IMAP servers are painfully slow for server searches. Very few of them build an index. Interestingly, doing searches against Gmail's IMAP is also dog-slow :-(
See RFC 3501, section 6.4.4:
http://www.faqs.org/rfcs/rfc3501.html