The Application Frame is one of the user frames used for camera calibration. The Z direction of this user frame must roughly point along the optical axis of the camera. If the camera is pointing up or down then the Application Frame can be World (UFRAME[0]).
Most Vision Processes have an Offset Frame. The Offset Frame is the user frame in which the vision process offset is calculated. The few vision processes that do not use an Offset Frame, have their offset calculated in the Application Frame.
You should select World (UFRAME[0]) as the application frame number when the camera is pointing up or down, except when the camera or grid is mounted on a different robot arm.
If the camera is not pointing up or down (which makes World (UFARME[0]) unacceptable), then the User Frame which was taught to the calibration grid is a good choice in most applications.