The .img file is a disk image of your home directory. (Like a .vhd) This image file is saved in a file share in Azure storage. It is referred to as a "user disk image"
When you launch Cloud Shell for the first time, Azure will create an image file and store it in a file share. It is then mounted as /home/<user>/clouddrive. You can upload and download files to your user disk image.
The next time you launch Cloud Shell, this image is mounted automatically, so any files you have uploaded will be available (think scripts, SSH keys, etc.)
You can choose to create a new file share when you launch CloudShell. This will also create a new user disk image in this new file share. The previous file share and the user disk image stored in the previous file share are unaffected. They will remain and you can switch back to them if you need to.
Hope this helps!
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