Your understanding of it seems pretty good. Use a silicone sealer to prevent moisture intrusion in the grout. This keeps it cleaner and prevents damage below the grout on the wall. Sealer does not make the grout stronger, but prevents degradation from water penetration.
Since the silicone is difficult to remove from tile, and can cause it to be slick, it is usually recommended that you apply the sealer to the grout (to the extent possible). A squeeze bottle with a fine tip is ideal, or use a fine brush.