Path Forwarding is a unique and highly useful feature. This feature would be highly useful when you already have a full fledged web-site at a particular Domain Name and want to not only Forward some other Domain Name to it, but also all the paths associated with the website.
Thus, if you Forward "http://www.forwardeddomain.com" to "http://www.destinationdomain.com" and you enable Path Forwarding for it, then "http://www.forwardeddomain.com/index/index.html" would be Forwarded to "http://www.destinationdomain.com/index/index.html" and so on.
Path Forwarding will also work perfectly with URL Masking. In this case, if you type in "http://www.forwardeddomain.com/index/index.html" in your Browser, the URL in the Browser would not change but the page displayed will be of "http://www.destinationdomain.com/index/index.html".