It is only used to direct your to an existing like a Gmail, Yahoo or a Hotmail for example. To be specific you could set up contact@your—domain.com and have any sent to that sent to yourname@3rd-party–.com.
What is catch-all forwarding and how do I set it up? Catch-all forwarding is a great feature which comes with any domain name. It gives you the ability to forward all sent to your domain on to an of your choice.