What is the core significance of selecting publication target when creating new mailing?
When a mailing is created the first option you have is to "Test" it, i.e. send it out to one or multiple test email adresses. This will also render the mailing (i.e. execute the Template code). For this part you need a Publication Target.
Once the mailing is rendered once, its outcome is cached and that is what will be used for future mailings (untill you test it again). Hence you need to select the Publication Target at creation time of the mailing.
The final rendering done at mailing time will only combine Contacts and content, i.e personalize the mailing for the specific Contact you are sending it too.