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An efficient way to reduce the size of your Outlook Data File (.pst) or Exchange mailbox is to regularly archive older items. Unlike a traditional backup in which a copy of Outlook items is made, archived items are moved to a separate Outlook Data File (.pst).
Archiving in Outlook basically means that all e-mails matching the criteria for AutoArchiving are either deleted or moved to a separate .pst file. This file (usually called archive.pst) is stored on your local hard disk. The archived e-mails will be removed from your Exchange account because that's the whole point of process.