What does it mean when you ask if the income reported in my last year's return applies to this year's return? Are you asking if my salary was the same this year as last and if you should apply the same income to this year's return?

No.  TurboTax is asking so that if you choose they will transfer the data such as the employer and your personal information or other pertinent data that should come forward from one tax year to another.

It's all right to answer yes or no depending on what you want to see and compare year over year.  TurboTax will not enter last year's wages into the W2 for this year.