Whatever dimensions you specify, they'll be mapped to the entire screen by default. If the aspect ratios don't match, the displayed graphics will be stretched. So if you set your camera to a 5x5 coordinate system on a non-square screen without changing the drawing area, it'll be heavily distorted. If you render it in a square desktop window, it'll be fine.
The advantage of using smaller coordinate systems is that it's easier to calculate with, and possibly more meaningful in the context of a game - e.g. you can think of them as meters, as you said. It's useful in cases where the content matters more than the exact positions on the screen - like drawing the game world.
Using larger coordinates which match the resolution of some devices can be more useful when you're drawing UI. You can see how large you should make each image, for example, if you target that resolution. (Scaling can cause distortions.)
But ultimately, it's a matter of preference. Personally, I like smaller coordinate systems more, so I recently coded my level select menu in a 20*12 system. (I did run into problems when rendering a BitmapFont
though - they were not very well made for scaling like this.) Others might prefer to work with resolution-sized coordinates for gameplay rendering as well. What matters is that you should make sure you're not distorting the graphics too much by badly matching aspect ratios.