A VS Code workspace is the collection of one or more folders that are opened together in VS Code with associated settings. These directories are listed in Visual Studio Code's Explorer (Ctrl-Shift-E).
The extension parses the VS Code workspace folders and checks for the presence of any application. If any of the folders in the VS Code workspace happens to include one, the application is automatically added to the list in the Applications View.
You can quickly check where the workspace settings are stored and their current values using the Preferences: Open Workspace Settings (JSON) command from the Command Palette.
For more information about VS Code workspaces, read the official workspace documentation.