workspace vs. image

Hello [R]ians,

  I'm hoping someone can clarify the difference between a Workspace Image 
and Working Directory.  I created a directory on my PC, say,
"C:\Program Files\R\Project1" and then saved my objects in
"C:\Program Files\R\Project1\.Rdata".

Then, in a subsequent session, I reloaded these objects using

load("C:/Program Files/R/Project1/.RData")

At first, I thought I was suppose to use

setwd("C:\\Program Files\\R\\Project1")  

and that R would automatically use "C:/Program Files/R/Project1/.RData".
But this appears not to be the case.  
I got this impression from Section 1.11 of "An Introduction to R" which states 
"...objects are written to a file called '.RData' in the current directory".

What "things" then, should go in the Workspace Image but not the Working Directory
and vice versa (Plots?), and what am I not understanding?

Gratefully Yours,

Iyue

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Iyue Sung, PhD
Ingenix , Epidemiology Division 
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