This point is then your work zero coordinate - the point at which Mach3 will reference all of the moves in your g-code.
It is generally the same reference as that used when creating the g-code, also known as the home reference, work zero coordinate, home point and a few others.
Without this reference, your g-code will be run at some arbitrary position and not in line with the material or design needs.
It is only the centre of your router bit or "controlled point" as long as the machine DRO's show zero for both axes.