What does the library default save location actually do?

From Help it looks like it saves the library location to a location within the library which in turn is saved in the library and so on and so on. For instance, the "Documents" library contains (among others) "My Documents" which I've chosen as the default

save location, therefore, the library, "Documents" is saved in "My Documents". Just silly.

After reading some of the questions on this subject, it looks like it does something else.

So what does this default save location actually do? Please be detailed as it makes no sense to me yet.

P.S. Okay to have a good laugh at my expense on this one.

Or.... (I did some more research)

... does this allow me to specify where a program stores it saves?

If so, would the following be correct:

My Flight Simulator saves are stored on my incredibly fast but smallish C drive. I want them on my massive D drive. So I set up a folder on my D drives called FS saves, put it the same library that Flight Simulator is in and choose FS saves as my default

save location.

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