I'd appreciate a clarification about the ambiguity Zotero data directory versus my data directory. e.g. This(1) is where I want Zotero to find my pdfs (e.g. on external disk), and this(2) is where Zotero should generate its internal folder structure. I only see one option, so which function does that option serve? What actually happens when I say "Restore to Online"? Thanks.
You can also configure a Linked Attachment Base Directory and use linked files, generally with the third-party ZotFile plugin, to automatically move files to an external directory as linked files.
Neither is really where Zotero "finds" your files, but I'm not sure what you mean by that.
What actually happens when I say "Restore to Online"?
That's not related to the above at all. Is that meant to be a separate question? If so, it's better to ask in the thread you already have where use of that option was suggested to you.
Upgrade Storage
The Zotero data directory is where Zotero stores files that it manages for you.
You can also configure a Linked Attachment Base Directory and use linked files, generally with the third-party ZotFile plugin, to automatically move files to an external directory as linked files.
On the difference between stored and linked files: https://www.zotero.org/support/attaching_files#file_copies_and_links
Neither is really where Zotero "finds" your files, but I'm not sure what you mean by that. That's not related to the above at all. Is that meant to be a separate question? If so, it's better to ask in the thread you already have where use of that option was suggested to you.