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A file is information stored persistently with a name and a path in the file system. There are several types of files: a file stores relevant information for the user, a directory organizes files, and a link serves as a shortcut to a file. Files can be categorized by the type of values they hold: text files store characters and can be processed by text editors, while binary files store bytes for specific programs. Additionally, files can be sequential, where records are stored in contiguous memory, or random, allowing direct access to records. Data streams connect programs to input/output devices, using Reader and Writer for text and InputStream and OutputStream for binary data.