--host 127.0.0.1 - server will listen on the loopback interface and not on the externally accessible interface (network). i.e. will work only on the host machine, and not from anywhere else.
--host 192.168.1.3 - server will listen on the externally accessible interface with the given address. It will be accessible when accessed on this remote address. If the machine multiple network interface, each with different ip, server will be accessible only from the mentioned ip address and not from all the other addresses.
since you want to access it from another remote machine, you will have to provide the externally accessible address of the machine to the --host flag so appengine can listen on it.
if the address is mentioned as 0.0.0.0 server will listen on all available addresses on the host, so it can be accessed from either within the host or from external systems.