Meaning of '"Applications" would like to receive keystrokes from any application'

I would not allow it under most circumstances. This permission is potentially allowing a keystroke logger to run on your Mac. A keystroke logger is a form of malware that can monitor your activities through listening to what you press on your keyboard.

This can be a very serious security issue as they can potentially "listen" to you as you put in your passwords and then compromise your accounts, such as a bank account or email password.

The only circumstance I can think of to warrant this is if you are installing accessibility hardware(think like for a blind person) which requires more info.

I once allowed this permission for logitech's app so they could custom remap the butons on my mouse. I found this acceptable, because in order to provide the functionality it offered, it did need to listen to my keystrokes across all my apps. I remapped the keys so pressing the mouse side button opened mission control.

Whenever this or another dialog pops up, think, does this app really need/use the feature it's asking for, or is it spying on me, data mining me so it can sell my data, and/or hacking my accounts?

MacOS protects your security with these dialogs and if you enable access to apps you are bypassing these valuable security features. However, if you are trying to run an internet phone app, it will need access to your microphone to function. Security is about balancing needed app permissions while also only granting the minimum access a specific app needs.

However, in this instance, I would not allow it. A request from "Application" looks like malware to me.