No one says it better than Knuth (TeXbook, Chapter 10: Dimensions, page 59).

    When you say \magnification=2000, an operation like \vskip.5cm will actually skip 1.0 cm of space in the final document. If you want to specify a dimension in terms of the final size, TeX allows you to say true just before pt, pc, in, bp, cm, mm, dd, cc, and sp. This unmagnifies the units, so that the subsequent magnification will cancel out. For example, \vskip.5truecm is equivalent to \vskip.25cm if you have previously said \magnification=2000. Plain TeX uses this feature in the \magnification command itself: Appendix B includes the instruction

    \hsize = 6.5 true in

    just after a new magnification has taken effect. This adjusts the line width so that the material on each page will be 6½ inches wide when it is finally printed, regardless of the magnification factor. There will be an inch of margin at both left and right, assuming that the paper is 8½ inches wide.