5mm is indeed the focal length.
1.25" diameter or 2" diameter nosepiece
Diameter does not affect magnification only the focal length.
Telescope focal length divided by eyepiece focal length = magnification factor
Depending on the scope, 5mm eyepieces usually give quite high magnifications which then require decent seeing and possibly tracking capability.
For example my 128mm F8.125 scope has a focal length of 128 x 8.125 = 1040 and a 5mm ep gives 1040/5= 208X
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