Yes, this will sync the local copy and the SPECIFIC ACCOUNT copy, but if you save a contact, say, on your Google account and you update it on your PC, the phone copy will update but it will not 'cross over' to your Microsoft or Exchange account. Also, those files are created once the contacts are Exported. The phone's local database is always locked and encrypted unless you give an app permission to read or export it to any of the supported formats.
To the OP's question, there is no '/Internal Memory/Contacts Here' folder you can access your contacts in freely on your phone.