Is it necessary for node exporter and target to reside on same system. In Documentation it is given that it is recommended to be on host but nowhere stated about if it is not on host.
To the best of my knowledge, node-exporter must be installed on any system for which you want to collect node-exporter metrics.
i.e. the node-exporter service exposes a local systems metrics via a tiny webserver running on port 9100 (by default), and Prometheus collects those metrics via HTTP GET requests.