Yes it is a way to create a new drive. But not a real drive, it is actually more like a virtual drive. Your basically setting up a shortcut to a place on your network and assigning it to an unused drive letter. Such as Z:.
The drives that show up in the box are the available drives. If you already have A:, B:, C:, D: drives, then your only going to be able to choose from E: and up.
This is a way to set up Virtual Drives. They behave identically to having a real drive, but they are more like shortcuts to data.
Say the computer your back-end database is on goes by the name of Backend. (Can find this out by right-clicking on network neighborhood and choosing properties.) The database on that computer is sitting in a directory off of C: by the name of ReceptionData. Now you want to install a copy of the front-end system onto a computer by the name of Reception. So you could map a network drive to Z: and give it the path '\\Backend\ReceptionData\'. Of course you'd also have to share the ReceptionData directory to the correct network users as well.
Hope this helps you figure out how to map the network drives.