Behavior of "Keep all settings after firmware update"

I am developing a custom package, and it has the following statement in the top-level Makefile:

define Package/elgwct/install
	$(CP) ./files/* $(1)/

	$(INSTALL_DIR) $(1)/usr/sbin
	$(INSTALL_BIN) $(PKG_BUILD_DIR)/$(PKG_NAME) $(1)/usr/sbin/
endef

I have a question regarding the “Keep all settings after firmware update” behavior. According to the following link, the behavior of the option is as follows:

  1. Backup all config files (maybe all files in /etc/config?)
  2. Copy files described in custom package Makefiles
  3. Restore the backed-up config files

Is this correct?

Just a quick reminder for this post. I’d like to hear your thoughts.

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