what exactly does proxy_http_version mean?

[admon.org]

Along with nginx-1.1.4, a new directive named 'proxy_http_version'
introduced
I thought it was something related to the communication between nginx
cache and upstream web server, right?

But per my tests with latest v-1.2.1, Nginx is still using HTTP/1.0 to
access upstream web server.

+++++++++ 
abc $ curl -I -H 'If-None-Match: "9cx7b1-x2e-44xa4x9axd0x0"'
http://test.stg/crossdomain.xml 
HTTP/1.1 200 OK
Server: nginx/1.2.1
...
+++++++++ end

Which intends to return 3.4 if it's using HTTP/1.1, did I misunderstand
this directive?

Thanks for any input..

Posted at Nginx Forum: http://forum.nginx.org/read.php?2,228225,228225#msg-228225