When you make a mortgage payment, part of that payment goes towards interest and the balance towards paying off the principal. So if you have a $300,000 loan, you are paying interest on $300,000.
Money held in an offset account (a transaction account linked to your home loan) reduced the principal owed when it comes to calculating interest.
As an example, if you have a $300,000 mortgage and have $50,000 in an offset account you would only see interest calculated on $250,000.
From there the maths is fairly simple. The more of your payment that is going towards reducing the principal, the faster you will repay the loan and the more interest you will save. As an example, if you were paying an interest rate of 5.50% in the scenario above, you would save $90,000 in interest and repay your loan 7 years faster!
In fact, its a double benefit. If you left that $50,000 in a savings account then you would earn a small amount of interest (which is more than likely less than inflation anyway), have to pay tax on that interest and have a higher interest payment on your non-tax-deductible home loan; but when the $50,000 is in the offset account, it saves you 5.50% (effectively "earning 5.50%) and its tax free!