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You can edit server files using either the Config Files option or directly via FTP. The Config Files option allows you to make quick edits to the majority of server configuration files using a simple text based editor and for some of the core configuration files such as the server.properties, you can use a nifty interface.
The Config Files are comprised of any file from your server the panel can read as editable, making it an easy way to quickly configure files without having to access them via FTP.
Though most of the files you encounter are editable, some will not and can only be accessed via FTP. For those you can edit, it will either be done using a text based editor or interface.