activesync conflict replace item on device or desktop?

[willpower101]

When I right click an activesync connection and choose settings it gives me the option: If there is a conflict: Replace item on device OR replace item on desktop.

I'm a little fuzzy about what's happening here. So lets run through some scenarios and see if this is correct.

1. If I add a calendar date on my computer and sync - phone updates to match?
2. If I add a calendar date on my phone, then sync- desktop updates to match?
3. If i add a calendar date on both, then sync - Do they both update? Or does one of them replace the other?
4. If it's the former, can't they just merge? Or does this only occur if they can't merge because of something in the same slot?
5. Is there someway for it to just tell you there's a conflict and let you manually fix it instead of writing over your saved info?

Now... how does this apply to files, like a spreadsheet or shopping list in the synced files folder. Say I add an item to the list on my ppc, do I have to sync before I can change anything on the computer version?

Lastly, can activesync sync this info between my desktop and laptop over my wifi on a regular basis, so I only have to connect the phone to one or the other?