Viewing/Changing App paths used by `open -a foo.app ...`
If you type the following commando:


  open -R iTerm.app


it will reveal the iTerm.app you're currently selecting in Finder.

If you type 


  open -a /applications/iTerm.app


it will open the iTerm.app in the /Applications folder as you said.

If you type


  open -a iTerm.app


it will open iTerm.app in the current location. (you can type ls to see the contents of the current folder, or use the above method (-R)

As a general hint, please type 


  open --help


to see the methods/commands available you can use.