I would guess that "Restore" means the character selected at the start of the fight.
Meaning, if your were to trigger a fight with a companion like Shadowheart, she would be the character selected at the end of the fight.
Meanwhile, "Avatar" will always be the custom character (I don't know how that would work in multi).
Ooh, thank you. I hadn’t spotted that and have clearly missed any posts here talking about it! Interesting to know.
Honestly, I'm not sure such post exists (I could be wrong), I only found that option while messing with the settings 😅.