Yeah, that's one way.

Another way (common here) is:

• The officials calculate the average time the racers are taking to complete one lap
• Then they multiply this by 5 coming up with a time for 5 laps
• Then, they announce over the P.A. system to the racers, "5 laps to go" at the appropriate time
• First one across at the end of those 5 laps is the winner

This type of race has nothing to do with distance. It's called a "criterium". It is done this way to make scheduling of races easier. A promoter may have 8-10 races (each one a different category--age, gender, ability) scheduled for that day.