Understanding how sharing works

This might sound like a dumb question, but I can't figure it out from the documentation. 

Say I have a folder with a couple of files. 

I mark the folder and click on add users, add another user on the same filerun instance and give all but “share links” permissions.

I can verify that this worked by selecting this folder, going to more options → control panel → shares

BUT if I do the same with the files inside the folder this does not reflect. Is this how this works? Are the files inside a shared folder automatically shared? What about sub-folders?