Yep, that's it in a nutshell. It changed between iOS 5 and 6, though.
In iOS 5 and prior, it used to use your preferred brightness as the "center", and then based on the ambient light, adjust up or down by a certain amount as soon as you unlock the screen. While using the phone, it would ratchet brightness up if the ambient light got brighter, but wouldn't adjust back down after that until the next time you unlocked the screen.
The main thing was that it used to leave your selected brightness setting alone. So, you could keep it darker or brighter in general by choosing where on the scale you wanted to be. And it was really smart about sticking to the general range you picked. If you turned it all the way down, auto brightness would barely turn it up at all. And if you turned it all the way up, of course, auto brightness would never turn it down. Anywhere in the middle, and it'd keep it generally to that level of brightness unless in you're in complete darkness or outside in direct sunlight. I always kept it at about 25% with auto brightness turned on, so it'd be perfect for me while indoors and it'd still crank it up when I go outdoors.
In iOS 6, that all went away. I don't know what it's supposed to be doing now, but it appears to be constantly fiddling with your brightness slider and not letting you choose its center point. It'll go up or down slowly at any time, with no minimum or maximum, based on the ambient light. Apparently the brightness at any given level of ambient light is determined by Apple's engineers who are under the mistaken impression that everybody's eyes and preferences for brightness are exactly the same. It's about as useful as Android's auto brightness now, which is to say, at least for me, not useful in the least. It picks too much brightness in my normal indoor settings.
Seriously one of the most annoying things I've encountered in all of Apple's modern "features". They had it down pat for 5 years and then they threw it out the window.