When to use 'Set a Default org' option in VS Code Salesforce

Another option to set default org and authorize an org in single command. When you have successfully authorize an org to the Vs code then to get the deploy/ retrieve options in your code, You have to set the default org for that project because vs code does not know on which org you want to deploy, So need to set default org.

You can set default org by following these simple steps

Apart from this set default username command

sfdx force:config:set defaultusername=<Alias_name>

        ---------- OR ----------

You can also set the default username at the time of login through terminal command by using the below command

sfdx auth:web:login --setalias <Alias_name> --instanceurl <YourOrgURL/InstanceURL>

Yes, the org you specify with "Set a Default Org" is the one VS Code connects to for the purposes of metadata deployment, retrieval, test runs, etc.

When you select "SFDX: Set a Default Org" from the Command Palette in VS Code (Ctrl + Shift + P), the following Salesforce CLI command is run (and you can see this in the output):

sfdx force:config:set defaultusername=MY_ORG

Per the docs for this command, this will apply locally within the project you have open, since it doesn't use the -g/--global flag.

That's exactly right. The VS Code Extension Bundle does not ask for which org you want to deploy/retrieve to/from. You need to set a default org in order to use many of the commands in the bundle. This also sets the config files so that the CLI (e.g. bash) will also automatically deploy/retrieve to/from that org. Setting it locally affects only the current workspace, while setting it globally affects all workspaces. You can see the currently selected default org in the lower-left corner on the status bar in VS Code, and the CLI can show you the currently selected org via sfdx force:config:list.