srv1 is the name of the connection in the saved connections. It can be displayed on the tab instead of the hostname?

I'm not sure what is "srv1". You wrote that you want to display a hostname. Isn't hostname "vps-sdfsgr43w4.vps.net"?

Clear now, I was in wrong how I put the problem on the table. What we actually want is tab titles as short as possible, which is the server name. There is:
WinSCP Folder path (the virtual folder structure where my servers are saved). What we want is to not show it
And the login name @ server's hostname vs the short name given in WinSCP. What we want is to display the short name not the full user@hostname.
So COMPANY/SERVERS/DEPLOY/root@vps-sdfsgr43w4.vps.net will simply become : srv1 and displayed on the tab. Having many tabs we will see all name even when opening 30 tabs, if i give really shor names: srv1 srv2 ... or even shorter: 01 02 03 04 ....

It removes the path from the window title (NOT the tab title).

I have to admit that I don't even know what this settings should do. Somebody suggested to set it off to make more space I guess on tab for the server name without the path. But it does not work.

Thanks for the report. Can you post few screenshots for a start?

WinSCP
View Preferences
Do not show path in window title - does not work
Still shows full paths in tabs and title as before.