They sell little lava rock pieces as regular biomedia for filters. It tends to be a bit dusty, for it breaks off little bits easily. It is also rather sharp, but if it is in the filter, the fish cannot run into it and get hurt. It is a fine, slightly cheaper version of ceramic cylindars, bioballs and other media that also is designed for the filter.
Lava rock, because it is blown through and through with air bubbles, has the tremendous surface area for the beneficial bacteria to colonate. That makes it an ideal biomedia for your filter.
As a substrate, or even as a large decorative rock, however, it tends to break pieces off a lot - causing debris in the tank, and can be VERY sharp. Fast goldfish can smash into it during breeding frenzies, telescopes can scrape eyes and bubble eyes should avoid it altogether.
Lava rock is inert, and does not bind or convert ammonia, nitrite or nitrate in any fashion that I know of. Most likely what they are referring to is that they are excellent platforms for beneficial bacteria which will then bind and toxify ammonia and nitrites in a cycle.
I do not think I would use this in an open tank, but it makes great biomedia in a filter!