Correct, correct, and correct.
The retention period in File History, and any backup software that is an incremental data backup, is how long do I retain the versions other than the current static version. The frequency of backup is how often do I want to make a new copy if anything is changed.
I'm going to give an analogy that I think is reasonably easy to grasp. Think of the various versions as photocopies of the original document, taken at a specific time, that are held in a filing cabinet. Once every backup period (let's say one hour) someone's checking the filing cabinet to see if the oldest photocopy is older than the retention period (let's say 4 hours). If it is older it gets tossed. This continues hourly until the only copy left in the cabinet is the most recent photocopy.
If you make a change 5 weeks later, then a new photocopy is placed in the folder. If you keep making changes over the course of 4 hours, multiple copies will be kept while this changing is going on, and the oldest copies tossed away when they are older than 4 hours.
You eventually have only one backed up copy of anything that is older than the retention period and that has not been changed. It will only be deleted from the backup if you delete the original, and even that, I believe, won't happen until the retention period has passed for the one copy has been sitting there.
Brian - Windows 10 Home, 64-Bit, Version 1803, Build 17134
The real art of conversation is not only to say the right thing in the right place but to leave unsaid the wrong thing at the tempting moment.
~ Dorothy Nevill