chroot ssh

[j.travis]

i am working on setting up a chroot with ssh from (chrootssh.sourceforge.net)
the instructions say this:

the chrootssh patch looks for a '.' in the users home directory, 
then calls chroot(2) to whatever directory was before the . 
and continues with the normal ssh functionality. 
E.G. If your home directory was /chroot/./home/bob, you'd be 
chrooted to /chroot and /chroot/home/bob would 
actually appear as /home/bob to you. 

but I am very confused by this idea of a '.' as a directory name, especially since '.'
and '..' already exists in every directory and also because of these errors:

[root at devel2 testssh]# mkdir /home/testchroot/.
mkdir: cannot create directory `/home/testchroot/.    ': File exists
[root at devel2 testssh]# mkdir /home/testchroot/./userx
[root at devel2 testssh]# cd /home/testchroot/./userx
[root at devel2 userx]# pwd
/home/testchroot/userx

Can someone help me understand this situation a little better?