On sale product usage

How do we use the product.on_sale in order to showcase products on the home page? The product block has an option to show products based on things like popular, newest and on sale etc.
How does the feature really work? Does it automatically show products whose price has been adjusted (reduced from the price set upon initial product creation)?

This page (or block) shows products whose price is less than the list price. Promotions are not taken into account

Meaning If I reduce the list price from the original price then the product will automatically show in that block as sale?

Yes, you are right !