Yep it's taking the difference between peaks and troughs in heart rate, for plotting with the breathing rate it looks at the min and max over the breathing cycle.
Exactly. Generally the best athletes have very high max HR and low resting HR but by measuring how quickly and how low your HR goes back down after an exercise is a decent indicator for stress, overtraining etc.
If your normal rHR is 55 but it only goes back down to 90 after exercise it most likely shows that you are untrained, stressed or overtraining.
This is measured over a very short time scale though – so not a persons absolute max and min heart rate, just how it varies over a few seconds. And yes, higher HRV is generally healthier and points to a better balance between the fight-and-flight response, and rest-and-digest response.
