There's an implicit assumption that if you are generating an archive, then you are going to download it so that you can deploy it somewhere else, if you were going to use Akamai for hosting, then you wouldn't need an archive.
When you use custom code or 3rd party custom scripts it is possible that Launch will build multiple .js files that have to reference each other. In order to reference each other, they need to know where they will be hosted. This self-hosted path to Library option is required so that they multiple files can reference each other properly.
And since the assumption is that you're hosting stuff on your own, then as you noted, the embed code changes.
So with all that, if you provide anything in the self-hosted path to library field, you can then save the Environment. Along with your new embed code, you'll also get a link to the archived download. Launch will still build your library and deploy it to Akamai, but instead of deploying a bunch of JS files, it will deploy a zip file to Akamai, and you'll download it from assets.adobedtm.com/...
Note, that there won't be anything in that location until you actually make a build, but the idea is that you'll download it from that location on Akamai, and then upload it to your own server in the location that you told us, and your embed code (on your pagE) will attempt to grab it from your own server where you told us it would be.
Till_Buettner 's screenshot above has a highlight colored over the archive option. When you create/edit an environment, there's a toggle to create an archive. If you don't see that on your environments, please let us know the property name/environment name where the archive option isn't showing up (you can also just copy/paste the URL from the environment page) and we'll take a look.
A debug library is an unminified library. If "Include Debug Library" is on, then unminified builds will be produced and deployed alongside your minified Launch files. You can find them by removing the ".min" from your embed code URL.
If you create an archive, you can download it as soon as you produce a build. So if you want to grab it from Dev, just use the archive option on your Dev environment, once you build to Dev, you can go hit the download link on your dev environment to grab the file.
In listening to the West Coast Office Hours from the 8/15 meeting, it sounded like the archived zip file could be found at assets.adobedtm.com (see 1st screen shot -- it is minute 47:15 in the recording).
Yet, when I select "Create archive" I have to provide a "Self-hosted Path to Library" in order to save my Environment (see 2nd screen shot). When I provide this value, then my embed code changes.
I was under the impression I had to go to my "Self-hosted Path to Library" to find the zipped archive file -- though my build/publish will still go to Akamai.