Comparison rates are a guide for you to compare the estimated true cost of finance.
When you see the advertised interest rate and then they provide the Comparison rate, this is not a comparison to the market, but what the estimated total cost of the loan is, so the true rate.
So when you are looking at a home loan, always check the Comparison rate to other bank Comparison rates, as that is the true cost of the loan including annual and monthly fees, etc.
For the technical side of the comparison rate, for home loans secured against real property it is based on a $150k loan with a 25 year term.
While the real costs of finance will differ depending on the loan amount it is definitely a good starting point when comparing loans, but all fees and charges including redraw fees, etc should be confirmed with the financial institution you are dealing with.