What does "InnoDB stores its tables and indexes in a tablespace" mean?
A tablespace is essentially a black box that InnoDB manages allby itself
  
  tablespace which is essentially a virtual filesystem spanning one or more files on disk.InnoDB uses tablespace for many purpose It keeps its undo log,insert buffer,doublewrite buffer,and other internal structure in the table space
  
  By default, all InnoDB tables and indexes are stored in the system tablespace. As an alternative, you can store each InnoDB table and its indexes in its own file. This feature is called “multiple tablespaces” because each table that is created when this setting is in effect has its own tablespace.
  
  Advantages of Per-Table Tablespaces
  
  You can reclaim disk space when truncating or dropping a table. For tables created when file-per-table mode is turned off, truncating or dropping them creates free space internally in the ibdata files. That free space can only be used for new InnoDB data.


InnoDB File-Per-Table Mode

The InnoDB tablespace