The definition of “color” and the implementation of its adjustment in Blender is really a lot more complicated than it seems at first sight
Absolutely! There are very few people that totally grasp how it works, and I would not yet put my self in that category.
Converting something to sRGB means squeezing the color space of an image so that colors being outside of sRGB are shifted into this color space.
Yes! That’s exactly it.
For normal maps specifically, think about it this way: the Normal Map node needs to use an image that’s been converted to sRGB. If it’s baked in sRGB, you wouldn’t want to apply the conversion again when importing, so we set the node to non-color data. If it’s baked in linear, we haven’t yet converted it to sRGB, so we set the node to sRGB and the Normal Map node gets what it expects. The transform should only happen one time throughout the entire process – either during the baking process itself or when importing.
I’d highly recommend reading through the series Spikey linked to above. It’s very helpful! I haven’t gotten all the way through it yet but it’s quite good so far.
