Here’s the difference:
APPLIED ON STANDBY: Archive logs are only deleted after they’ve been fully applied to all standby databases. This is safer for recovery but can use up more storage since logs stick around until application is done.
SHIPPED TO ALL STANDBY: Logs are deleted as soon as they’re successfully shipped to all standby databases, even if they haven’t been applied yet. This saves storage but might leave you with gaps in recovery if something goes wrong.
Side effects on prod?
With SHIPPED TO ALL STANDBY, if a standby stops applying logs for some reason (like a sync issue), you could lose recoverability for that standby. APPLIED ON STANDBY is more conservative but requires more disk space for archived logs.
I’d go with APPLIED ON STANDBY if you want to play it safe.
Discussion: https://forums.oracle.com/ords/apexds/post/shipped-to-all-standby-vs-applied-on-standby-9281