Yes of course you can store your files on the external disk, but I would advise against using it as your only copy.
You need a back up regime because external hard drives, just like internal hard drives, can fail, and if they do it is often catastrophic, and that means you have lost everything.
So, use the external if you wish to free up space on your internal hard drive, but those fies you cannot afford to lose should also be backed up somewhere else, like CD or DVD.
I bought FreeAgent Go portable external hard drive. I installed it but now how do I use it to my advantage. Can i move all my music and game files over there and erase them from the main harddrive?