do people generally make associations between app version and config
how do people choose the right combination of (application version,
config version/set) when roll back to some earlier version is required
in any one environment?
"People" don't do things like this "generally" in software development. There are dozens of ways this can be implemented in software, and the "right" way depends on a hell lot of things. For example,
- how many installations do you have for your application?
- does each kind of installation have a different config?
- will each kind of installation allow lots of users with different configurations?
- what life cycle has your application and how does the config structure change throughout the life cycle (is it backwards or upward compatible?)
- what kind of backup/restore infrastructure is available and can configurations easily be backuped together with the application?
- Is it a database application, a destop app, a server app, a smartphone app, an embedded app?
- can there multiple versions be installed in parallel in one environment?
- What happens when a configuration gets lost, can it easily be restored / recreated?
Just to give you one example: MS Office came in versions "2003", "2007, "2010", "2013" etc. You can mostly install them in parallel, each version with a separate configuration, for each user, and probably a machine specific configuration, too. User specific configurations are stored in different folders per version, one could theoretically backup and restore them individually (though I guess the majority of Office users don't do this, if the machine fails, they will install the program again and recreate their original configuration manually). And as you see, for this kind of application both suggestions of @MainMa are fully unsuitable: there is neither a "version control system" nor a database where the user config could be stored.
Other programs might work completely differently, because if a config gets lost, a critical production system might fail, which might have a serious financial impact for their business. So you have to look at your kind of application, switch on your brain and decide under what category it falls.