There are two memory places in the X where files are stored ... on the SD card and an internal memory. In earlier versions of the operating system, all apps were on the internal memory and misc files (music, photos, ringtones, things you create, etc) were on the SD card. Now, however, it's possible to have apps dl to the SD card. On the SD card, apps would be preserved if the X crashes or you need to do a Factory Data Reset. However, there are some issues (not sure of what, personally) with having apps on the SD card. Check some other threads for details.
I wouldn't recommend poking around in the internal memory files or making random changes to the SD card files unless you know what you are doing. Little changes can cause big problems.