This option is intended to be used for hiding reference data (lookup tables) in record link fields. When enabled the app and all accessible data will still be downloaded to the mobile device, but the app will not be accessible by the app selector on mobile.
This is ideal if you do not wish to present the linked app to the field user and only want them to access the linked app though the record link field.
To hide a linked app, start on the homepage then:
Go into the app designer of the app you want to hide.
Click on the ADVANCED button on the right side.
Within the Advanced Settings modal check Hidden on Dashboard.
Click the Save button.