The File Share plugin allows users to securely share files between Obsidian vaults using end-to-end encryption. By leveraging a socket server, users can directly transfer files by simply exchanging a key with their friends and saving it in a friend list. A default server hosted in Germany is available, but users can also set up their own socket server using the provided Docker image or direct machine setup. The plugin ensures secure and private file sharing, making it an ideal solution for collaboration while maintaining data integrity.