Its an exchange in the sense that you exchange money for bitcoins and vise versa. But with that said, no where near how other well known exchanges work. Your price is locked in based on other exchange prices.

Quote from the support site

We integrate with a variety of exchanges and also hold our own reserves. When you sell your bitcoins for USD we usually sell them to other Coinbase users at some point down the line (this is where our reserves come from), but we may cash them out if needed. In general, our goal is to abstract away some of the complexity so it's a simpler process for our users. What we have now is a good start but not finished by any means. Hope it helps!