When you have an option to select a file for a feature, you'll have two buttons to use.
Choose: This option allows you to follow a path to select a file that you've already uploaded to Files OR to upload a new file, select its folder, and perform any modifications allowed for its file type.
Upload: This option allows you to select a file from your local computer and insert it with a single click. The file is uploaded to the "root" folder in Files for later organization.