How does this work? Is this meant to ensure animals are near people's homes so they won't have to go far to hunt? Or is this meant for admins to designate areas for animals? I'm assuming the former, but wanted to check.

If I'm correct, and it is to ensure animals are closer to homes, how does it determine how many are near homes?

What it does is when an NPC spawns, it's home is set to the location it spawned at.  NPCs will not wander beyond the configured distance relative to their home location.

Thanks for the quick response! Appreciated.