Why is /home/<user> called 'Home' in Nautilus (and other file managers, such as pcmanfm)?

The "Home" in nautilus is simply a link to /home/<username>. It is the same way that windows puts different names (.e.g. "My Documents", but it's "Documents" in terminal).

It is to make it more user friendly, they want your "Home" space to be obvious how to find. It is only more advanced users that find that it is different - so you don't get conflicts with other users. It's also easier when helping someone remotely, to say "Click on home"

Typically, your home folder is /home/user but this is optional. A system administrator can put it anywhere, and nautilus's Home link will redirect to the new place, if it is set in /etc/passwd.

My pronouns are He / Him

It is called the user's Home directory, even when working from the Linux Command Line. All the directories under /home are called Home directories, they are grouped together for the sake of simplicity. Think of it this way: Just like /bin stores binaries, /home stores Home Directories.

So when Nautilus tells you the directory is "Home", it is literally "Your Home Directory", and therefore not a misnomer at all. It's the culture of Linux.

Another person pointed out that the $HOME environment variable is set to a user's Home Directory. The name for the variable has the same reason behind it as the name "Home," namely it's the culture.

Why is it the culture?

In an ideal Linux instance, everything the user does, all custom configuration, all documents, files of any kind, will exist inside that folder. It belongs to the user, it's in the user's Home Directory. That means the user can keep to himself, and makes knowing where your stuff is a bit easier. The computer kernel, programs, boot controls, all the stuff needed to run the computer, can go everywhere except inside the user-generated space, their home directory. Linux doesn't install any programs inside the home directory (third party programs might do this anyway), and there is always a system-wide configuration that a user could override if they want. The override configuration would be, of course, in their home directory. If you went from one Linux computer to another, and all you brought with you was your home directory, if the other computer [was set up to see you as a user, and] had the same programs installed, it would be almost as if you were on your original computer.

The HOME environment variable stores the path of your /home/<username> directory.

$ echo $HOME
/home/avinash
$ pwd
/home/avinash

So when you are in /home/<username> directory(nautilus), its corresponding variable HOME is displayed.