Well, It's quite simple.
When you start typing a URL, the application doing two things: search application history for given URL and query browsers history.
Searching application history is obvious. But chrome history is not.
In fact it just query your history with query you entered to URL field and displays results in suggestions dialog.
If you ever visits this url it will be displayed in list so you can your job faster :) I know that probably you just paste URL in this field but I think is a good feature anyway. It do nothing else with your data. You can check trunk to see what it actually doing with history data: http://code.google.com/p/chrome-rest-client/source/browse/trunk/RestClient/src/org/rest/client/suggestion/UrlsSuggestOracle.java