Polishing cloth is a strip of heavy emery cloth. Comes in a range of grades on big rolls(in boxes like pizza boxes) about and inch and a half wide and yeah, is considered a perfectly normal way of finishing a job.
You tear off a length of a foot and a half(or more depending on the job size), lower an end down the back of the job, reach under for it with your other hand then draw the ends towards you - polishing the back side of the workpiece. It's a fingertip affair with very little pressure being applied(too much and the cloth cooks and tears up) and is a bit like drying your back by holding two ends of a towel. Your hands are pretty much together (between the guard and the bed)and well clear of the piece.
I commonly rest my left hand pinky on the front bed edge and use my 'free' right hand to control the cloth. Others prefer both hands free - finish with a flourish!
Have never had my hands pulled towards the piece. Have had the cloth yanked from my fingers many times...
An unfortunate accident for sure.
There's very little safe about operating heavy machinery and a million ways for things to go wrong. Poor lad.