As someone who installs, configures and tests location scanning systems with WiFi as the base, you can indeed pickup on location down to room level based on WiFi signal.
Not 100% accurate with one AP, but two or more in a smallish house, and your phone will be able to pickup what side of the room you are on, down to what corner you are in.
This may not use the same technology, so it may not have that accuracy, but to those saying it can't pickup what room you are in, it kind of can.