My understanding is that it just hides them from the UI; if you upgrade your plan, you get access to all your old messages and files that were previously "gone".

Yes this is correct. In fact even without a paid subscription you can access all files that have been added to a Slack through the web UI (myslack.slack.com/files). You can't see the related messages, but all the files (images, snippets, etc) are available as one big list.

I did not know this. Useful, thanks.