I agree that the wording is somewhat confusing. Here’s how it works:
If you setup an email address, let’s say email@example.com it will ONLY get mail sent to firstname.lastname@example.org
If you also setup an email address of email@example.com any mail sent to any address at mydomain.com OTHER THAN firstname.lastname@example.org will be sent to the forwarded address.
If you have the catch-all address, mail sent to email@example.com will go the catch-all account. So would firstname.lastname@example.org.
The catch-all is meant to catch mail sent to a wrong address at your domain.
That can be good and bad. It can generate spam as spammers know that many domains have a catch-all so they just send to a random address at the domain such as email@example.com. That’s the bad part.
The good part is that you can fight spam using a catch-all, too. Say you signup for a newsletter at reallygood.com. They ask you for an email address as part of the registration. I usually give firstname.lastname@example.org
Now if I start getting a lot of spam sent to email@example.com I KNOW it came from reallygood.com selling or sharing my email address. To avoid all of the spam at that address I simply make a new email address called firstname.lastname@example.org and make its mailbox size 1k. It is almost instantly full and the spammers begin getting undeliverable notices which normally drops your address from their robot’s lists.
Most email servers can be taught to filter most spam anyway.
My suggestion: have your “good” email address be the one you give friends and family, have everything else go to email@example.com which forwards to your good email address. When you begin to get a lot of spam - look and see what address it was sent to.
One last thing, I also give some friends firstname.lastname@example.org as my email address because it is easier for them to remember. The catch-all address receives it, forwards it to my good address, and I can filter by friends’ names to have their mail get tagged as important or moved to a friends’ folder.