I would have to setup a test system with JClouds installed again, but IIRC the toggle was on a per template basis and enabling it would cause that particular template to not attempt to do an connection to the instance until it had received the call back to a "phone home" URL. How that phone home gets triggered is left up to the admin creating the actual image being launched, not the the Jenkins system.
Here's the info from the JClouds plugin: https://wiki.jenkins-ci.org/display/JENKINS/JClouds+Plugin#JCloudsPlugin-Usingthenewphone-homefeature
You'll notice that they aren't saying that they're manipulating your cloud-init, they're stating that they delay the connection setup until the POST is received.
Here's the webhook code for it https://github.com/jenkinsci/jclouds-plugin/blob/master/jclouds-plugin/src/main/java/jenkins/plugins/jclouds/internal/PhoneHomeWebHook.java
As to the latter being more familiar to users. I'm not so certain on that. Since most folks are likely using cloud-init to work with, the phone_home feature has been in there for a fairly long time now it's just a matter of things being written to take advantage of it.
How do you control when cloud-init creates a user?