@Varma Thanks for reaching out to Microsoft Q&A, apologize for any inconvenience caused on this.
when should we use the 'Don't clone' option and when should we use the 'From Existing Web App' option?>
There is no such ground rule that when to use Dont clone
or clone from existing app
option while creating the deployment slots in azure app service.
for example, If your application which is in production slot and the application which is going to be hosted in the newly created deployment slot has same application settings instead of manually creating the each setting you can clone from the existing app service.
What settings will cloning happen when we choose from an existing web application?
As mentioned in the documentation in step#3 under Add a slot section, You can clone a configuration from any existing slot. Settings that can be cloned include app settings, connection strings, language framework versions, web sockets, HTTP version, and platform bitness.
Are these DNS records?
No, these are not DNS records. Hope this helps, let me know if you have any further questions on this.