Files and the osmos folder
Where documents live, the folder on your phone, and Recently Deleted.
Files holds documents osmos has made and documents you've shared with it. The same files appear in the Files app on your iPhone under an osmos folder, so you can open them in other apps or drop files in there for osmos to read.
Anything in Files can be referred to in chat: "Summarise the lease in Files".
Deleting
Deleted files go to Recently Deleted for 30 days, then are removed for good. Restore from there if you change your mind.