OS X :: Adding Files To ITunes...Does It Copy The Media? Or Just The Location?

I am still pretty new to Mac and OSX and i had a question about itunes.

Ok, So if i add say 1 album and 1 Movie. Lets say the the album is in My Music folder and the Movie is in My Movies folder.

Now if i go to add to library in iTunes and add them then i am done. If i go and delete the 2 files from the folders i notice that the album and movie is still in itunes and still playable? How is that if i deleted them from the folders on my Mac?

Does iTunes actually COPY the movie and music i add to its own folder? so that way if i do delete it from my mac, its still in a iTunes folder somewhere?

Like with windows, WMP copies the location of that media, So if i add a album and later delete it from my PC and go and try to play it in WMP, it will say NOT FOUND or just no longer show it.

Reason i ask this is because i do not want to have double of everything on my HD and take up more space then i should...