Shepard hears the significance of the term— a title, clearly. She's not unused to the sensation of bafflement, but usually in this case it's from the other side. SPECTRE doesn't have much play outside of her own context, for all it's potential as a descriptor. Very few people have ever accused Shepard of subtlety, after all.

"And Shinra's your uh... nation. Country," Nailed it. She's so good at planetary politics, can you tell, "Where you're from."