Check out the image below on this page! We provided this visualization because we are visual people, too.
CAD Monkey uses relative path for all XREFs. This gives you the ability to simply move the files around to your desired folder, or share with outside vendors, without needing to bind or reattach any of your XREFs
If you ever want to confirm which templates you are using as the source files, just run the configuration command (MONKEYFREECONFIG) and you'll be able to update the source file templates, change your file suffix, or just confirm it all looks good.
You can, but not just yet. CAD Monkey Free only provides one specific file tree, but CAD Monkey LITE and PRO will let you provide more customization, more files, and Paper Space references. Keep checking back for updates!