Very cool. I guess it was obvious, but I just realized it now. You can actually use the ".local" address to connect to another computer on your network. So if I have an iMac and name it "zardoz" I can run ssh zardoz.local on my powerbook and it automatically connects to my iMac.
Like, I said, I guess it was obvious. The line "Other computers on your local subnet can reach your computer at xxxxx.local" should have tipped me off. I just thought this was a weird apple sharing type thing. Didn't realize it worked with any old tcp app.