Vargottama means “the best place in the set” – where “the set” is talking about the amsha divisions, specifically in this case about the most important amsha, the navamsha. The “best place” is to be in the same sign in the navamsha as the planet is in in the normal zodiac – you got that correct.
As to what it actually does for planets… “gives a planet extra special strength.” Consider it like this… if I am in new york, I have certain resources at my disposal. Now, if I am in New York CITY within the state of New York – I am “really” deeply in New York, and those resources are very ample. That is what it is like for a planet to be in vargottama. The planet has very deep, full and ample access to the resources specific to whatever sign the planet is in.
– Vic DiCara