If you upload the files when the toggle is off, the uploaded files will be displayed in a table.
From this table, you can select the records where the files will be linked to your selected records.
But if you do not select any record, the uploaded files will not be linked to any record. It will be saved in the file tab with no parent/associated record.
If you want to delete the file(s) from the files tab, you can select the files you want to delete from your org and click the Delete button, this will delete the uploaded file even from the Files tab.