It applies to which pages the browser will get (because of what it identifies itself to the site as - a mobile browser or a desktop browser). But if you go to m.youtube.com, you get a video that doesn't need Flash, so you can see it in Chrome. If you set Chrome for Desktop you'll get youtube,com (not the missing "m."), which has Flash videos, and since Chrome can't use Flash, even if you've installed it on the tab, you'll get the "this video needs Flash Player" or whatever wording the error message uses.
That's one reason it makes sense to look at pages designed for phones even though you have a 12" tab. (If you use a browser that can handle Flash, and install Flash on the tab, your argument may be correct.)
Another reason is that a lot of mobile browsers, when operated in Desktop mode, identify as Safari 5, which many sites will barf on and tell you that you need at least version 5.1.
If you're using the right browser and visit the right sites, use the Desktop mode. Or use a browser that makes it easy to switch back and forth - like Atlas or Next (just swipe left and one of the items is the Desktop/Mobile switch).