According to a new video posted online (below), the Nexus 7 does indeed respond to magnets. A user is shown running a magnet along the edges of the Nexus 7 in portrait mode; when it reaches the bottom left, the Nexus 7 goes to sleep. The user posted his video - titled "Nexus 7 has 'smart cover' sensor" - to YouTube, where it was picked up by AndroidPolice.com.
The magnet-based cover option is, of course, available on the iPad.The Microsoft Surface tablet will have a similar option when it debuts later this year. Will the Nexus 7 also jump on that bandwagon? As AndroidPolice noted, Google has a cover available for the Nexus 7 on Google Play, but it opens from right to left and doesn't seem to fit with the placement of the magnet.
Google confirmed that the functionality is built into the Nexus 7 screen. At least one case maker, KaysCase, responded in the YouTube video comments that it is interested in making a Smart Cover-esq cover for the Nexus 7, so stay tuned.
In response to chatter about Google copying Apple, several commentors on AndroidPolice and YouTube noted that RIM's BlackBerry smartphones have had the magnetic functionality for ages. These "proximity sensors" know when a phone is in or out of a holster, shifting settings as necessary.
Apple secured a patent for its Smart Cover in April, according to Patently Apple. But as AndroidPolice noted, the patent appears to be pretty specific to the iPad.