When Google introduced the "trusted devices" smart lock mode, those with compatible devices and hardware were presented with a much easier way to unlock their devices. For those who are unaware, essentially having the feature enabled on your phone would allow the screen to be unlocked when you come in proximity of it while in possession of a trusted device, like your Android Wear smartwatch for instance. A new smart lock mode seems to be rolling out to some users that will lock and unlock your device based on whether or not you're either holding the device in your hand, or if the device is in your pocket.
The new mode is called on-body detection, and would allow you to keep the device unlocked for the full period of time when the phone or tablet is on your person. This is Google giving users one more way to try and ensure that data and any other sensitive information is kept secure should the device end up lost or stolen. If the device is still technically in your possession, but it's placed on the table or any other flat surface you set your stuff down on, the device can detect that it isn't being held and will automatically lock up. When users pick the device back up they'll have to unlock the device manually(presumably by entering a PIN or Password), which would remain unlocked for the remainder of the time it's "on your body," hence the name.
On-body detection is reportedly not an Android 5.1 Lollipop specific feature, but it may end up needing Lollipop in general for it to show up on the device as an option. As pointed out by Android Police there are more than a few people reporting the feature being enabled on their devices, so it does seem to be an official smart lock mode Google has meant to begin pushing out. What's unclear at this time is if this is a sort of soft launch going out to a smaller number of users or if the roll out will begin slowly hitting all users who have a compatible device.