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Here is the official word from Microsoft TechNet, The C:\Users folder is shared when any sub folders from C:\Users\<username>\ is shared. The article is stale and mostly unhelpful, but worth knowing to complete the story.
Shared folder permissions don't restrict access to users who gain access to the folder at the computer where the folder is stored. They apply only to users who connect to the folder over the network. Shared folder permissions are the only way to secure network resources on a FAT volume.