The state of affairs with files and file handling is strange.
- Files are not first class content in core. It is disputable whether they should be or not, I have no clue about the answer either, basically I'm sitting on the fence on that.
- There is a file api, which provides basic file operations. It is quite improved in D6, and I hope that hook file will get into core as well.
- The only file related module in core provides attachments, similar to email attachments, and with various filter modules you can embed them inside your node's content. This is a very specific text document oriented need, and is very useful
- There are loads of contrib modules and ways you can deal with files in the larger drupal universe.
- There is a lack of modules tackling what I would call document management.
