Items are saved* to a .rtf file with all of the text from the original Mail, Contact, Calendar, Task, or Note item.
The file name is generally made up by the subject, sent by name, and date/time sent of the original item.
Attachments are saved with their original file name, SentBy name, DateSent, and file extension.
All items and attachments are stored in a folder structor (made from the .pst Folder structure) on your local hard drive. You can store archived items at any location.
*Items are only copied to your hard drive and are not modified in any way. The items in your .pst file are never altered!