Wallet & seed phrase
A wallet stores the keys that authorise spends — never the coins themselves, which live on the chain.
In simple terms
Your 12 or 24 recovery words regenerate every key pair in the wallet. Anyone who has the words controls the funds; the coins themselves are just entries on the public ledger.
Analogy
A key ring plus its master blueprint: the ring opens specific doors, and the blueprint can forge every key on it — so guard the blueprint above all.
Going deeper
BIP-39 turns entropy into a checksummed word list; BIP-32/44 derive a tree of key pairs from that seed, so one backup covers unlimited addresses. Hardware wallets keep the signing operation inside secure silicon; multisig setups require m-of-n keys to move funds.
Common mistake
Never enter your seed phrase anywhere — no airdrop, no "support", no website. There is no recovery service for lost seeds.