What does "module" in new doctype form mean and what to choose as "module"?

When creating a doctype, adding workspace, adding desk page etc we are given an option to choose a module.

I had some doubts around this which I couldn’t get clarity from the documentation:

  1. Is it ok to choose a standard module when creating a custom doctype. Is there a chance of loosing the changes when we do an update or run a migration?

  2. What does custom module in the module list means? When is the right time to use it.

  3. Is it compulsory to have a custom app when creating a new doctype or page to ensure we don’t have future issues?