It's best to use the PasswordSafePortable\Data\PortableSafes directory - or another directory on your portale device - so your password safe is always on your portable device and does not move.  The PortableSafes directory will be selected by default on your first run of Password Safe Portable when you click New and then Save.

This LocalSafes directory serves as a backup for when users accidentally create safes in Password Safe's default location of a My Safes folder within the local Documents directory.  These files will be moved to and from the local machine.  There is a danger of them being left behind on a system crash or possibly recovered after being deleted (though they would then need to be brute force cracked if someone wanted access), so we highly recommend against storing files here.