I configured it like this because I use a lot of shared dashboards. Setting similar to this lets the user view dashboards without access to other parts of the kibana system. There may be other ways to do this but this is what works for me.
When you access a dashboard there are more parts that need to be accessed through the proxy than just the dashboard. Those would be the items listed in the location section. When you are using a location directly to /app/kibana/dashboards/dashboard_name it will not load some of what it needs. You can probably see this if you watch the web developer console in your browser as the page tries to load.
I see in my location part of the config /plugins is referenced twice, that was just a mistake as I typed the config part, it does not need to be there twice.