How are files stored on Windows Phone?

I am thinking of switching to Windows Phone but I was wondering if someone could provide some clarification on a couple items.

I am told WP7 can't/shouldn't be used as a mass storage device. I have lots of work pdfs and documents that I like to view when I'm traveling. Lots of the time I don't have access to a network when I read these documents. This applies to many types of scenarios, not just for business documents but all types of files that need to be accessed by a program. Is there some way you can store these files on your phone? What if you create a new document/file and there is no network present. Where/how is the file stored?