How does @file share file as context and copy file content differ in Cursor?

Cursor is asking me to share files, so I did. I selected and added them to the context. That was not what cursor needed. It needed the content of the files. So I copied the files from the Explorer to the chat. That was also not what it needed. It needed the actual content of the files copied. I found it very weird.

I read: Cursor - Build Software Faster but I couldn’t find an answer to my question.