Not to be confused with normal file storage. Web App storage (also called BLOB storage) is used by your website and web based applications to store the data, files, videos, images etc that are required for normal operation.
If you reach your 1GB storage limit on your Cloud hosting package your website and applications can continue to utilise the 10GB of free Web App storage that SME Hosting are happy to provide to you to keep your business running.
Your working documents (like emails, spreadsheets, presentations, photos etc.) can be stored and accessed through your Office 365 account. They cannot easily be saved to, or retrieved from, Web App storage.