We're looking to setup some retention policies and I'm not understanding what Archiving actually does.
For example, what's the difference between these two things:
Either way emails are gone after two years but what happens during the 2nd year if emails are in Archive vs just in the Inbox?
Well they don't stay in Inbox is what happens - less space used by the "main" mailbox, so less issues with Outlook cached mode, etc. With respect to the actual keeping/removing the item, it's no difference.