What would be a application for the 1/8” ? I contemplated using on drywall or also on floor to adjust door way transition height

The 1/8 .in is used mostly for adjusting transitions, like if you have 3/8 inch thick tile and you have a mosaic that is thinner going in as accent, you would use 1/8 to flush it up. Please let us know if you have any questions about your project, we are happy to help.