The technique of simulating a reflection of the environment on a surface is called reflection mapping. You basically take a pre-rendered image of an environment and use this as the source for reflection mapping. In fact, it doesn't really reflect the environment around the object, it is just a simulation. For this technique, believability is more important than accuracy.
Because this feature has some serious issues in combination with an external model and UV mapping, we used a sphere in our demo application instead. At the time of writing, it is not recommended to apply this technique on external UV mapped models. Take a look at EnvMapShader in the demo and see how the sphere seems to reflect an image of a desert. Select the bumpmap checkbox and see how this gives an even better illusion of reflection caused by the surface which isn't perfectly flat anymore. Also, have a look at how changing the light position changes the reflected image. The following image on the left...
