I was under the impression that the "current traffic situation" was pulled from Google Maps, although, now I cannot find where I heard that...
Regarding the prompts to work/home and rerouting due to traffic conditions, you have to set a threshold on how many minutes you want to save before it reroutes you.
From the user manual:
"on your usage patterns, Model S may prompt you to save a current location as Home or Work. After you save a Home and a Work location, Model S may prompt you to navigate to your Work location in the mornings and to your Home location in the evenings and tell you how long it will take to navigate in current traffic conditions. To navigate to your Work or Home location, simply press NAV TO WORK or NAV TO HOME when prompted. You can also press Settings and specify an amount of time to be saved (in five minute increments, up to 30 minutes) before Model S reroutes your drive to your Home or Work location."