It is not a definite myth but is a subject of much debate. However, it may well be that it is from smell (olfaction). We certainly know that cats have a significantly larger number of scent receptors, being approximately 200 million, compared to the 5 million receptors humans have. Cats also have an organ called the Jacobson's organ found in many animals that helps to pick up scents even more, especially chemicals - hormones.
As an example, the primary hormone released to progress labour is oxytocin, which causes the body to perform homeostatic positive feedback (initial stimulus is increased until an end result). This begins when the baby's head puts pressure on the cervix, which triggers contractions. This in turn starts oxytocin release which speeds up both the frequency and intensity of the contractions.
This increased concentration of oxytocin could well be what the cat is smelling as animals are well known to detect human hormones such as adrenaline in situations of fear. Although oxytocin is usually present in the body even apart from childbirth, in the moments leading up to labour and just afterwards, the oxytocin concentration is at its highest concentration. The cat probably sensed the 'abnormally' strong smell and began to behave accordingly as it recognised it from instinct (cats release oxytocin in labour too).
It's still all very hypothetical though so I don't know of any authoritative investigations for you to have a look at – it’s one of those anecdotal subjects which has yet to have any concrete evidence.