Yes, that is what it means. If the live site becomes broken or content is deleted, it can be completely restored from these automatic backups, including everything in the database and also all file uploads (usually images embedded in posts).
Since hacker damage to the site could, in the worst case, also delete the backups, that is not completely fool-proof. For that case we have a daily backup of the whole server (incl. your 100 daily site backups) for the last 14 days. Once we migrate to a new Edgeryders server (soon), I will find a backup solution roughly equivalent to that.
Note that the “Backup → allow restore” setting says “Leave false unless you plan to restore a backup”. That is for security reasons and suggests to only enable this right before doing a restore. It does not affect the possibility to restore from the automated backups. So I have disabled that option now, as suggested.
As for checking backup integrity: as long as backups in the list of backups are listed with a reasonable size (megabytes; as currently) and the logs in the messages about automatic backups do not contain any errors, backups can be assumed to be fine. We have restored such automatic Discourse backups on several occasions and never had an issue.
Note that there’s still a Discourse bug that prevents manual backup and restore in the user interface. Automatic backups are not affected, and Daniel found a way to restore backups from a commandline console on the server, and tested that with the openethnography.net site last week. You could tell Daniel to fix that Discourse bug completely. But because it’s not preventing us from doing what we want, I’d rather suggest we save that money and wait for the next Discourse version to see if the bug is still present there.
That’s a high but reasonable setting and will not cause us issues as the site content will be rather small. (On edgeryders.eu though, we’d run out of storage with 100 backups …).
To make the 101st backup, the system will delete the oldest existing backup first, then add the new one, so that the count of backups never exceeds 100.