Yes, "remove deleted" means:
"Remove from AquaMail those messages that had been synced to the device at an earlier time, and then discovered to be missing from the server, presumably deleted by the user".
That's a bit long for a preference title, so I had to shorten. If the wording is confusing, I'm open to suggestions.
The setting is "on" by default for IMAP and EWS, and "off" by default for POP3, to mimic the typical logic of desktop mail apps.