I have a Mac Mini with iTunes 10.2.1 installed, I enabled home sharing in the preferences and the Advanced menu. I also have an iPhone 4, which I enabled home sharing on using the same username and password that my desktop uses.
Both computers are connected to the same home network. When I open up the iPhone's iPod app, however, I don't see any of the songs that are only on the Mac. I only see those that have been synced with the iPhone (i.e. I use this Mac to sync my iPhone).