Installing a rom

[K1NGM4RV]

Hey guys, short question about the flashing instructions provided by "ingbrzy"
He basically said the following:

• FORMAT /data partition (NEVER wipe System or Persist!)

My question is whether I can format the device (since it removes encryption and wipes the SD card as well) or if that is strictly prohibited (since I'm not sure whether it wipes system or persist) and I'm only allowed to do a factory reset? It's pretty hard to find what "Format device" in TWRP does exactly, so maybe one of you guys has some experience about this particular topic ^^

I've always flashed AOSP based roms and it was always ok to wipe the system partition (basically anything you want), that's why I am a little bit confused here.

Thanks for your help guys! Cheers!