Yes, you are on the right track. The expression is used to warn against using a difficult or obscure word (a so-called "big word") when a simple one would suffice. Separately, you can refer to a complicated word as a [high value] word (e.g. a 5 dollar word) and a simple word as a [low value] word (e.g. a 5 cent word).
I found a blog post that has the following:
The linguist Dwight L. Bolinger has written that the word “dollar” is used in many expressions to suggest something important or pretentious. The phrase “ten-dollar word,” for example, refers to a big and pretentious word.
In the October 1942 issue of the journal American Speech, Bolinger says “dollar” is common “as the second element (preceded by a numeral) in combinations ref. to important or pretentious words.”
Writing in the journal’s Among the New Words column, he notes that “cent” and “bit” are used as the second element in similar phrases. And by extension, he says, the “dollar” usage is applied to important things as well as pretentious words.
Bolinger, gives these examples of the usage in action: “two-, four-, five-, ten-; fifteen-dollar, seventy-five-cent, two-bit word; sixty-four-dollar question, problem; five-dollar question.”
And here’s a much earlier citation for a pre-inflationary “half-dollar word” from the Jan. 2, 1890, issue of the American Machinist:
“There has been far too much highfalutin by men who, to cover their own ignorance, have used long half-dollar words to express what no fellow could understand.”
Grammarphobia: Ten-dollar words
Note that that are many iterations for the higher and lower values. You found 5 dollars/25 cents and 25 dollars/5 cents. Some versions use 50 cents as the higher value; some use it as the lower value.
“Don't use a five-dollar word when a fifty-cent word will do.”
Regardless of amounts, the idea remains the same: the higher valued word is complicated, while the lower valued one is simple.
Generally, idioms and metaphors can be adapted to give a new meaning or fit a different context. Using your quoted answer, we have something like
It is a $5 term for a 25 cent* concept.
→ It is a complicated term for a simple concept.
See also: Value (in cents) of big words (ELU)
*Cent not cents.