By default, Parallels Desktop shares the 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.
Note: To use this functionality, you should have Parallels Tools installed in the virtual machine and the Isolate Windows from the Mac option disabled in the Security pane of the virtual machine configuration.
Use Mac files in Windows
Your Windows Desktop shows items from your macOS Desktop, and My Documents folder in Windows contains items stored in the Documents folder on your Mac disk. The same applies to other user profile folders.
When you delete anything from these folders in Windows, the data is actually deleted from Mac. Usually, you may find it later in either macOS Trash or Windows Recycle Bin.
When you create or save any files to Desktop, Downloads, Documents, Pictures, Music and Movies folders in Windows, these files are actually saved to the corresponding folder on Mac disk.
Manage Shared Profile
You can configure what folders will be shared with Windows in the virtual machine's configuration > Options tab > Sharing > Configure...
Select what folders you want to disable or keep as shared and click OK:
In Parallels Desktop 16 and later:
Starting with Parallels Desktop 16 the ability to share Recycle Bin with VM has been removed to simplify working with Trash in VM.
In Parallels Desktop 15 and earlier:
Note: you would need to log out from the Windows user session and log in back to apply the changes.
Share any Mac folder with Windows
You can share any macOS folder with your Windows virtual machine, see KB 124928.
To stop sharing Mac folders with Windows, disable "Share Mac user folders with Windows" option in virtual machine's configuration > Options tab > Sharing.