File handling in Python allows storing and retrieving data from files. There are two types of data - persistent data stored permanently in files, and transient temporary data. Files can contain text or binary data. The os module allows creating, renaming, removing directories and listing their contents. Files can be opened in different modes like read, write, append to perform operations like writing, reading, copying and retrieving metadata. Objects can also be serialized into files and deserialized later for storage. The with statement automatically closes files after operations.