When you drag files to the Dropbox folder they are automatically uploaded online. A file uploaded online via the Web will be synchronized and show up in you local Dropbox folder too. 2GB are free, with 50GB available for $9.99/month.
Sharing involves sending an invitation to the other party. The other person then needs to install Dropbox, so this is not the easiest method perhaps. Once installed, the shared folder is copied and synced with their Dropbox folder. If the other party don't want to install the software, he or she can access files via the online Web using a unique URL. Installing the full software does enable automatic transfer of all shared documents, so that's a big advantage for some.
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