Yes, for the last question.

re-flashing overwrites the internal flash storage (i.e. where the operating system and your files are). As part of the re-flashing the flasher will detect any backups you made on your SD card and offer to restore the backup. Doing that will re-install some of your files (things stored in MyDocuments, local BT/wireless configurations and a bit more).

re-flashing without restoring a backup is essentially to set it back to factory setting.