What is the meaning/reason for the generated entries in web.config>configuration>runtime>assemblyBinding?
Does this mean if I have a web project that depends on a class library and that class library has a reference to an older version of the assembly which has a a bindingRedirect, that the code will execute as if it were compiled against the newer version?
You have it right (I would just say "...the code will execute asif it were referencing the newer version"), see http://msdn.microsoft.com/en-us/library/7wd6ex19%28v=vs.110%29.aspx
"When you build a .NET Framework application against a specific version of a strong-named assembly, the application uses that version of the assembly at run time. However, sometimes you might want the application to run against a newer version of an assembly."