More or less. When the spark plug fires, No1 cylinder should be at TDC. The strobe lights up when the spark plug fires and lights up a mark on the flywheel as it spins.
The marks should line up at every flash when the timing is correct. If not, you adjust the distributor position until the marks line up.
Basically when the piston has reached its max height, and compressed the fuel & air mixture, this is when you want the spark plug to ignite. This gives you the most bang for your buck.