There are a few ways to smooth a low res polygon object which include using Smooth Mesh or converting to Sub-Division.

What he is probably doing in this instance is using Smooth Mesh Preview, which means if you select an object and hit 3 on the keyboard you will see an approximation of what the low res mesh would look like if smoothed with the Smooth Mesh command.This is a great option and time saver while in the modeling phase, also if you intend to render using Mental Ray it will render the smooth mesh preview without you converting the geometry.

If you intend to use the Smooth command (found under the Mesh menu ) be aware of a behavior that catches out some beginners, if you smooth a mesh then delete your history you will be stuck with the high res geo and will not be able to return to the low res state (another reason for using smooth mesh preview).

You can also create a sub-d proxy object (also under the Mesh menu set) using Smooth Proxy/Subdiv Proxy although if you are not that familiar with proxies i would stick with smooth mesh.

i hope this explains and helps a little.