Yes, it is a misnomer. The correct thing to say is that it reduces sourness. Sourness is a taste, and sweetness indeed reduces it, and vice versa. Coca Cola classic has the same pH as vinegar, 2.5, but the cola is sweet and the vinegar is sour, because the sugar in cola is enough to compensate the acidity and push the taste into the sweet range.
Acidity is a chemical quality of a solution, and is given by the amount of hydrogen ions freely available. It is not changed by the amount of sugar (except for very strong acids like sulphuric acid, which would react with the sugar and bind some protons in the reaction). Acidity "creates" sourness in the sense that we taste acidic food as sour, but as you can see in the sweetness example, our tongues aren't a perfect sensor and can be fooled by the presence of sweet substances, or also other things like miracle berries.
Note that sweetness really reduces sourness, and doesn't just "mask" it the way it masks bitterness or saltiness for some people.