yes you understood right.
I read, but have not tried, that the Vimeo app has a similar function.
A lot of people like McTube so I have been using it... it may just be the particular vids I picked to try out, but it looked to me like their display 'window' makes better use of real estate than the typical browser window [I use Dolphin, Safari, Chrome, in that order].
McTube has such a button that I assume is of the intention to zoom - it has presets like 1.5x, 2x, etc but it appears to scale up the video image, but within the defined window - so the window does not change. also it is buggy and on the whole, not useful. there's nothing lacking in the image quality at the norms of the vid source [unless its just a lousy source].
the average HDTV these days has a half dozen ways to manipulate the image, even the 'dumber' ones. you can force things to fullscreen [with consequences] or zoom, which means zoom the window, apparently. it does not as best I can tell recalc the image to higher dpi or such, as best I can guess it, just makes the image window bigger.
an aside, but a good thing McTube does do well is let you default to 1080p in settings if you prefer [and assuming the source either is or can emulate such] - overcoming a frequent irritation of youtube app and/or window-play in browsers.
i have to admit: side-by-side on just Video content... the richer the better, the samsung galaxy S 10.5 looks a LOT better - just a visceral thing that is hard to deny... Different aspect ratio and more real estate, dpi, .. Well it should: that AMOLED piece is supposedly the gold standard for the moment in devices of this size