[nnd]

How does it work? AFAIK you can't run a local webserver on iOS without a jailbreak.

What's the benefit compared a traditional network setup with a MITM proxy?

[IMcD23]

You can run a web server on iOS, and you don’t need special entitlements to do so. Depending on how you implement it, you may have problems keeping it alive while the app is in the background, however.