@LJ your explanation is correct. More precisely, the priority is used to resolve conflicts between objects that have features or edges close to each other, closer than the set geometry resolution. The geometry resolution defines the level of detail that the base lines (red lines) can see, and how close to each other two base lines are allowed to be.
If two baselines from two different objects (or settings groups) are closer to each other, they're not allowed to both exist if the priorities are the same. If one has a higher priority, that one wins and only its baseline will be included in the grid.
A priority of 100 forces the baseline to exist regardless of the value of the geometry resolution.
A priority of 0 means no baselines are used for an object of settings folder containing multiple objects.