When you open the vault, a new local “drive” should appear.
Here you save the files you want to encrypt.
The path you were asked during vault creation is the place where cryptomator stores the encrypted vault files. You’ll find several “masterkey” files in this folder and a subfolder that has the same name as your vault.
Do not place files here manually. They will not be encrypted.
Do not move, rename, change anything in this path.
If you have a backup plan (hopefully you have) and you want to include the encrypted files in your backup, this path contains all the files you want to backup. (Although I recommend a local unencrypted backup of important files).
If you want to sync your files to an online service, these are the files that have to be included into the sync.
Only the files that you store in the virtual drive that cryptomator creates after opening a vault will be encrypted.
When you close your vault, the virtual drive will disappear and thus the unencrypted files will not be accessible anymore.