My understanding of them is that they effectively use the municipal water as sort of an overflow. Many municipalities now require backflow preventers, which would make that sort of system either impossible or illegal. I don't know about where you live, obviously.

That system would save you money on piping, but I think the other system where hot water is constantly circulating in the pipes makes more sense. Effectively it's just extending your hot water tank almost all the way to the faucet.