The media are usually hosted on external sites i.e. nostr.build or satellite.earth
Or some clients like Primal offer their own media hosting within the client
I think by default nostr relays only contain text, but there are technologies being worked on like Blossom which, as I understand, is basically like nostr relays but for (encrypted) media.
PS I'm not very technical so I might off here somewhere ๐ If I'm wrong anywhere then hopefully some more code-literate persons such as @fiatjaf, @hzrd149, @miljan, @Vitor Pamplona or @The Fishcake (nostr.build) can correct me :)
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You got everything right except the encrypted part. The files stored on blossom servers is not encrypted
Clients (like ours) can and do encrypt content before pushing to blossom though