Hi John,
People use the term 1:1 because it conveys a meaning - about the size of the subject. It's an "old" term from the film days that describes the reproduction ration of the image captured to the size of the medium.
In the case of 35mm film (what most ppl use underwater) a 1:1 reproduction ration means that the subject photographed is 36mm across by 24mm tall.
Digital cameras with their all-different-sized sensors make the term somewhat more complicated to use, however, the main point is to convey the size of the frame captured.
When I say I captured a shot with my D100 that is 1:1 (35mm equivalent) I mean that the image captured shows something (a coral polyp for example) that is 36mm across x 24mm tall. Since I'm using an "old" standard (35mm equivalent) it doesn't matter how big the sensor on the D100 is, it could be 1.6x crop, 1.3x crop, or full frame - what matters is that the area photographed is 36mm x 24mm.
Cheers
James