About Mac to Windows folder sharing
By default, Parallels Desktop shares files from your Mac Desktop, Downloads, Documents, Pictures, Music, and Movies folders with Windows, which brings amazing convenience and data safety when you work with Windows on your Mac. The feature is called Shared Profile.
In addition to that, you can share other Mac folders with Windows, such as the Home folder, a custom set of folders, or even the entire macOS drive, as described in KB 124928. These folders will be mounted to Windows as network locations.
Note: To use this functionality, you should have Parallels Tools installed in the virtual machine, and the Isolate Windows from the Mac option must be disabled.
About Shared Profile
Thanks to this feature, Windows user folders such as Desktop, Documents, etc. are for all intents and purposes being replaced by those of your Mac. Original Windows Desktop, Downloads, and other folders are still there, but they are hidden.
This means that when interacting with one of the mentioned folders, you are actually interacting with the respective macOS folder.
Thus, if you save a file to any of these folders (such as Desktop) in Windows, it gets saved to the corresponding Mac folder.
And if you delete a file from one of these folders in Windows, you will actually be deleting it from the respective folder on your Mac.
Note: No files are being duplicated. The Shared Profile feature does not take any additional space on either your Mac or the virtual machine.
Manage Shared Profile
Note: starting with Parallels Desktop 17, the entire home folder is no longer shared with Windows by default, only selected folders, like Desktop, Documents, Downloads, etc.
To enable this feature, open the virtual machine's configuration, and click Options > Sharing > Share Mac > check Mirror Mac and Windows user folders.
To configure, which user folders will be shared with Windows, open the virtual machine's configuration, and click Options > Sharing > Customize...
There, you can select which Mac user folders will be shared.
Note: you would need to log out from the Windows user session and log in back to apply the changes.
Disable Shared Profile
To disable Shared Profile, simply open the virtual machine's configuration, go to Options > Sharing > Share Mac, and uncheck Mirror Mac and Windows user folders.
Note: in Parallels Desktop 16 and earlier, Shared Profile and Shared Folders features are interconnected. Therefore, disabling Shared Profile automatically disables Shared Folders.