Sort of. If you’re using wg-quick then it serves two purposes, one, as you say, is to indicate what is routed over the link, and the second (and only if you’re setting up the connection directly) is to limit what incoming packets are accepted.
It definitely can be a bit confusing as most people are using the wg-quick script to manage their connections and so the terminology isn’t obvious, but it makes more sense if you’re configuring the connection directly with wg.