Yes, it's true! You can buy wood stove pellets from hardware stores (usually a seasonal item) and use it as kitty litter. The pellets are compressed from saw dust, often pine or cedar natural scent. Upon contact with liquid the pellets dissolve into saw dust. The poop stays on the surface. 

The pellets are excellent for absorbing odours and you only need a small amount in the litter tray (a couple of layers at the bottom).  I've switched to the pellets and can't believe how the smell of cat urine has disappeared!

You can buy a forty pound bag of pellets for less than $5 and it will last a one-cat household about three months. A hardware store salesperson recently told me that 60% of wood pellets sold are for actual wood stoves...the other 40% are purchased by cat owners!

PROS
Cheap!
More natural (some city green bins will accept litter if in this form)
Odour-absorbing
No more kitty litter trail across your floors (dust-free)

CONS
Seasonal item
Must clean litter frequently (the poop, especially)

You can mix the pellets with a bit of regular litter to ease them into it.  I didn't do this though...I just switched over to the pellets on a Sunday and watched my kitty like a hawk to ensure she used the litter box as per usual.