Mmm, yes. However, the policy server runs on a different port. So you can still use an unmodified ircd, for instance, and connect directly to it from Flash as long as the policy server is running.
It's a different way of getting around the security problems, and it's a lot less intrusive than the WebSockets way of sticking an HTTP header in front of the whole thing, which would actually require modifying the server service instead of just running one piece of additional software.
[1] http://www.adobe.com/devnet/flashplayer/articles/socket_poli...