How app distributing works and what is mening of app versions?

Let’s say I have published an app and need to work on an update on development.
When I run “shopify app dev”, I would expect that it would affect only store that is set as development store and not other stores. What is the purpose of app versions if they do not set the application URL for the deployed app?

What is purpose of active app if it uses dev config on other stores?