Lot of guesswork and supposition here - as someone actually using the feature I'll try to clarify.
Smart Lock is the term used, and it controls whether a *secure* lock is used based on certain criteria - these criteria are trusted devices, trusted locations, trusted face and now on-body detection.
Trusted locations means that when I am at home I only need to swipe to unlock, but out of the house I need to enter a PIN to unlock.
Trusted devices means that when I am connected to in-car bluetooth I again only need a swipe to unlock vs needing a PIN.
Trusted face means what it says - not actually ever tried this one myself so can't comment
On-body detection means that if you have previously unlocked the phone and then placed it into a pocket/bag, the PIN lock will *not* engage until it no longer detects that it's on-body. Swipe lock is still in play to minimise pocket dialling, but it means you can pull the phone out of your pocket and do something without needing to put a PIN in all the time.
I'm finding the whole smart lock very good - I have it secure locked when I need it without it being an inconvenience when I don't. It seems to fail 'safe' in that I occasionally need to put the PIN in when at home, but that's so far only been the case first thing in the morning after a night of charging - maybe it has a time-out to force a PIN entry after X hours of not being used?