You can configure your system to store the files in any location you wish. Each of the database file and other file types can be kept in different locations, on local or remote disks. (On some operating systems, such as Windows NT, there are security restrictions imposed by the operating system which make it difficult to store a database on a remote drive.)
For performance reasons, you should always store databases locally if possible. It is a serious error to try to use network directories for storing database files as a means of achieving multi-user operation, and it does not work. You should always use DP4 networking components for this.