There are actually multiple locations:
1.) Emails, contacts, etc for Hotmail accounts are stored on Microsoft's Hotmail servers.
2.) Emails, contacts, etc for third-party accounts (such as those provided by Comcast, Time Warner, Yahoo, etc) are stored on the respective company's servers.
3.) Emails for all of your accounts are stored locally on your hard drive. Each account has its own subfolder created by WLM in the %AppData% directory, which is hidden by default.
4.) Contacts you add from within WLM are stored in the "Contacts" directory, which is available alongside My Documents, My Music, etc. These contacts span all of your email accounts and are accessible by third-party email clients you may choose to use, but are not automatically stored on the respective company's servers.
That applies regardless of how many accounts you have, who they're provided by, or whether you actually use a Hotmail account.
Hope this helps,
When using Windows Live Mail, I understand that WLM uses the server to store address-book and emails in case one uses a Hotmail (or Live mail)account.
However, where (and how) does it store the address-book and the e-mail if a non-Hotmail (or live mail) account is used?
And how does it handle situations where both Hotmail and non-MSN accounts are used?