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What exactly is a stage file?

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I've been working in OIC for a few years now, and I've just kind of accepted the Stage File function for what it is and can do. But what exactly is happening here? Is it creating a temporary location on runtime for the sole purpose of staging and manipulating files for individual runs? Is there a physical path that I can access to see all of the stage files?

I just want to know more about the underlying functionality, like what is actually happening in the stage file to make it work?

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