Your application can be started directly from the Modeler or it can run on a server. Those environments differ and to deal with that we use configurations. A configuration describes among other things where the database is located and how much memory your application needs.
In version 2.x there were two configurations: development and test. The fact that there were two configurations was mostly used to allow for two team members to have a different setup. Logically speaking the Modeler should only start applications in ‘development’ mode and even ‘test’ should be run on a server.
In version 3 we updated configuration management to reflect how it was used. You can create any number of configurations, so if your team has four members each with a different setup everyone can add their own settings. When converting a 2.x project the old Development and Test configurations are created. They can be renamed, edited and deleted like any other configuration.
When running on a server you specify the configuration on that server. The settings in the Modeler do not apply there. If you are using the Mendix 3 Cloud, configuration takes place in the cloud portal. Otherwise, the .m2eerc file on a Linux-based system or the Mendix Service Console on Windows are the means through which you change these settings.
Check out the documentation page to see all settings that are included in a configuration.