The documents  are stored  in SharePoint content  databases, although you can
still access  them via a UNC path, thru either WebDAV or SharePoint FrontPage
Server Extensions (depending on the port you are using), which is identical
to using the SharePoint 2007 explorer view. This means that SharePoint is
not hooked into the file  system whatsoever (although you can do it the other
way around and store SharePoint documents on the file system  instead of a
content database: http://www.lcbridge.nl/vision/2010/blob.htm ).

In Windows 2008 you can simple create a mapping like so:
- Open Windows Explorer
- Right-click the Network node and choose Map Network Drive.
- Choose Connect to a web site that you can use.... etc...
- Click Next twice.
- Enter the name of your list or library, eg: http://neptune/Shared Documents
- Click Next.
- Choose a name for this network location and finish.

If you're using it, you're missing out on all sorts of SharePoint related
actions, such as the possibility to check-out files  or start a workflow.
What I do like about it though is that end users are able to migrate documents
from a file system to SharePoint in the easiest way possible (or move documents
out of SharePoint to a file system, for that matter).