The former, yes.

It's interesting that some people find that way easier to remember. For me, multiplying out the terms seems faster, probably only because I've practised so many times in my life that I can picture the algebra in my head. It also seems more general, as it's a technique which you have to know anyway. I guess it comes down to being more geometrically minded vs algebraically minded. School should try to cater to both!

I wouldn't use it to calculate, but I would use it to explain why the calculation is what it is.