Crypto wallets are a way to keep your private keys safe. Private keys are passwords that give you access to your crypto. Digital wallets allow you to receive, send, and use your cryptocurrencies. There are many different forms of digital wallets, from a Ledger to a mobile app. To be clear, digital wallets don't actually store your cryptocurrencies. Your cryptocurrencies are stored on the blockchain and can only be accessed by using your private key. Your private keys allow you to prove your ownership of your holdings and allow you to make transactions. If you lose your private key you will lose access to your cryptocurrencies. This is why you must keep your private keys in a secure and convenient location to make sure they don't get stolen or lost. There are 2 types of digital wallets, hot and cold, but I will only be talking about cold digital wallets

Cold storage or a cold wallet is removing your private cryptocurrency keys from your online wallet to somewhere that isn't connected to the internet. Cold wallets don't have the ability to communicate with any other device unless it's physically plugged into that device when you're accessing your keys. Thus, cold wallets are the safest and most secure way to store your crypto. But if you lose this form of wallet, it's lost forever and you won't be able to recover any of the cryptocurrencies linked to that key.