It puts coded files into a folder called System Volume Information. You can't normally see this. To see it you would have to open Windows Explorer then select Tools >Display Options >View and remove the tick in box entitled Hide System Files and Folders. Before you do this, please bear in mind they are hidden for a good reason - messing about with system files is a very bad idea if you don't know what you are doing.
Any files you took off your computer will not be restored. System Restore will only restore operating system files. If you have uninstalled a program and restore the system to a time when it was installed, some references in the registry will refer to the program but it will not run (because you have deleted the program files).
System restore will have no effect on files held in My Documents.