Understanding Linux : /home

Linux is a multi-user environment so each user is also assigned a specific directory that is accessible only to them and the system administrator. These are the user home directories, which can be found under '/home/$USER' (~/). It is your playground: everything is at your command, you can write files, delete them, install programs, etc.... Your home directory contains your personal configuration files, the so-called dot files (their name is preceded by a dot). Personal configuration files are usually 'hidden', if you want to see them, you either have to turn on the appropriate option in your file manager or run ls with the -a switch. If there is a conflict between personal and system wide configuration files, the settings in the personal file will prevail.
Dotfiles most likely to be altered by the end user are probably your .xsession and .bashrc files. The configuration files for X and Bash respectively. They allow you to be able to change the window manager to be startup upon login and also aliases, user-specified commands and environment variables respectively. Almost always when a user is created their dotfiles will be taken from the /etc/skel directory where system administrators place a sample file that user's can modify to their hearts content.
/home can get quite large and can be used for storing downloads, compiling, installing and running programs, your mail, your collection of image or sound files etc.