I think they mean if you have a hunch on what might be a trend, check out the search trends on Google. If it's going up and to the right, you might be on to something.
You can also use something like Market Samurai to do keyword analysis. But by god, do NOT give them your daily email address, they will spam the crap out of you. Handy tool though.
great second post.
I agree with most of what you say but have to point out that you left out a big technique: search trends.
what you describe is finding apps that are already there and competing against them.
A different approach would be analysing search trends and match against niches with no apps.
For example, I remember discovering that paddling was a huge "industry" (as a sport) with ZERO apps.
For this, you would use services such as SearchManSEO or mobileDevHQ to identify niche "hotness" or the oldschool SEO way using GoogleTrends/Keywords.
hope it helps, Giacomo