The FrostWire media library indexes the folders you specify and presents you with all the media files inside those folders in the FrostWire Library interface for easy access. Just like any other player, the files are not saved INSIDE FrostWire - FrostWire just knows the path and helps you see them in one place.
Check what folders your FrostWire indexes and add/subtracts folders:
Tools > Options > Library
As a default, the Library will only include your download folder - the folder you specify FrostWire downloads all the files into - but you can add any folders you would like.
Check where your downloads are being saved:
Tools > Options > BitTorrent
Below is the Playlist Pane - you can create playlists by clicking on the New Playlist button or selecting multiple files, right clicking and selecting Add to Playlist > Create a New Playlist
Any audio file you double click, will start playing inside FrostWire. You can control the audio player from the top right corner.
Depending on your Video settings, your movie files will either open inside FrostWire in a new window or in your default system player.
You can change your settings in Tools > Options > Player