Yep, if you want applications that show you a “Documents” or “Pictures” folder to look elsewhere other than /home/yourusername/Documents, /home/yourusername/Pictures, etc., that place you found in the Settings would be the way to go.
Using that won’t modify anything in the actual filesystem about those folders, but it will direct the “Places” identified as Documents, Downloads, Pictures, etc. to the folders that you specify, instead. The underlying mechanism there is defined in the FreeDesktop spec for xdg-user-dirs: