That is correct.
let's say you have Auction profile for 1 lb and the default Listing template is "Sample Red w/Pink" But you have a pink swim suit and you really want to use "Sampel Teal w/Coral" for just this one Listing. Create the Auction lot from the Inventory Item and then change the Listing template in the Listing template field.
Or let's say you have 10 of that little pink swimsuit and you want to use the "Sample Teal w/Coral" listing template for it all of the time. In its Inventory Items, click on the "Auction Information" button. On very bottom you will see the "Listing Template" field. Click the drop down menu and select the Listing template you want to use.
That field value will override the Auction profile default. The default Listing template is used when the 'Listing Template" field contains no value in the Inventory Items or the Auction lot "Listing template" field.
I hope that isn't confusing.