Some kind of bug with the creation of fields. Are the names mixed up?
How can it work?
I agree it is a bit non-intuitive - the catch is that multi-entity can point to a list of entities (of one type), while an entity can point to a single entity of one of multiple types 
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Not sure what the question is.
here it is clearly shown that “Multi-Entity” allows you to select several types of entities
Hm that’s odd, indeed. Perhaps someone from SG can clarify.
note_links is an inbuilt field and what you are seeing is the relationship of that field in the Database.
Notes can link to many different entities (Assets, Shots, Versions etc), thats why you see that.