This is just a cable, male-microUSB to female-USB, and has nothing to do with host mode.
Actually, it's
not "just" a cable, and it has
everything to do with switching the USB port into host mode:
A full-size USB cable has 4 pins. A micro-USB cable has 5. One of those pins is open for a normal cable, but grounded for OTG.
A Nexus 7 does indeed support OTG. Even without adding an app, if you plug in an OTG cable, then a USB mouse, a mouse pointer will immediately appear on the screen, and respond to the mouse. Likewise, if you plug in a USB keyboard, the tablet will recognize and respond to it as well.
The rub is that it won't, straight out of the box, recognize and mount storage devices. But the $3 app that "Dixie Wrecked" referred to, "Nexus Media Importer" (the developer also has a free app that just views pictures)
will recognize and mount storage devices, rather nicely (albeit as read-only devices).
Or you can root the tablet, and use more advanced apps.