I can't figure it out: do the files which are referenced in the Binary element of .wxs file get copied to the target machine, or are they resources of the install package?
They are definitely the resources of the install package. This means that they don't get installed to your application folder, but Windows Installer is supposed to extract it internally to some temporary location to address the functionality in it. And it is supposed to clean after itself. But this is definitely not visible to the end users of your installation.
At least, this is how I understand it.
If you love us? You can donate to us via Paypal or buy me a coffee so we can maintain and grow! Thank you!
Donate Us With