Envoy/Istio are designed to move logic out of your apps and into the middleware.

For example, say your app A makes an HTTP request to app B and app B times out. Ordinarily app A has to build in retry logic (with expontential backoff to avoid dogpiling). Fine if you have a single app, but if you have a dozen microservices, that's a lot of duplicated code.

The solution is to let a proxy handle it for you. Instead of A -> B, you get A -> Envoy -> B. Envoy can do things like retrying, name resolution (something more flexible than DNS that can, say, be used to do A/B tests where traffic to B actually gets routed to another instance of B that runs code from a different branch), load balancing, request/bandwidth throttling, circuit-breaking (failing requests when an overload "trips" the breaker), logging, profiling (measuring timings and making them available to, say, Prometheus), tracing (inserting HTTP headers to generate a path so if a request goes A -> B -> C, then C has a complete "stack trace" that can be used for logging), and so on.

Istio adds a layer of transparency, at least on Kubernetes. Instead of configuring app A to use a proxy, app A just talks to app B as though there's no proxy at all. In reality, Istio has injected some local network magic in the container to route the traffic through the proxy.

You need it for "web-scale" (tm). You probably don't need it.

But unlike a lot of "web-scale" fads, you can drop this in when you actually do need it, you don't have to worry about it now.

So glance at the istio.com home page, and when/if you need any of that, come back and take a closer look.

It is better to run components in separate containers instead of one container that runs everything together. You'll likely have a single proxy but multiple copies of application. Also, you don't need to deal with getting Envoy and Python application built together, or even care about how the Envoy image is built since you can use the provided one.