You can use it both ways, I think, and sorry for being vague with the terms.
I’m fairly sure I used it initially just with the BubbleUPnP app and I agree about the stream going through the phone and app in that configuration. But you’re correct, I use it now with the BubbleUPnP server component, in which configuration the stream comes from the device running the server component (in my case a Mac mini)… and does the buffering, and possibly also transcoding to WAV, which might help optimise performance of the gen 1 streamers