When you check out a file from a Microsoft Windows SharePoint Services 2.0 site, the file is stored on the server while you work on it, but you must still check in the file before others can see your changes. In most cases, when you check out a file from a Windows SharePoint Services 3.0 site, you receive a message telling you where the file will be stored while you have it checked out. You will not receive such a message when checking out a file from a Windows SharePoint Services 2.0 site.
When you choose this option, you work with your checked-out files on the Web server or site where your files are stored. You cannot customize the specific location.