The 'filter by question' dropdown only works with assets that have a relationship column in them. If the asset selected for the answer type is grayed out, it can't filter because there is no reference by which to filter. If there are two asset lists that are related, and one of them is referenced on the form with an asset answer type, the another Asset answer type can filters off of the first question that is answered because both lists are related.
If using the "Filter By" Method to limit Asset List by a previously selected field; It is limited to filtering by "one to one" and "one to many" data models.
Filter By Example:
Having "Job" and "Cost Code" in a Section and filtering off each other. (This would limit the form to only being able to select 1 job and 1 cost code)
Having "Job" in a Section and "Cost Code" in a Tab Container filtering off each other. (This would limit the form to only being able to select 1 job but multiple cost codes by creating new tabs)