UMSDOS is essentially a UNIX-like file system overlaid on a FAT file system. This allows Linux to be installed on a partition together with an already installed MS-DOS or Windows OS. This allows for an easy way of trying out Linux that doesn't require re-partitioning and to uninstall Linux the whole \Linux directory can just be deleted in DOS/Windows.
All the Linux files will be installed in a normal FAT directory (usually c:\LINUX). This directory is then mounted by UMSDOS as the root linux directory. All the extra file attributes (long names, permissions) are stored in a separate file (--linux-.---) in the respective directory. The UMSDOS files and directories are not meant to be read/written/changed by the DOS and Windows tools (because these obviously don't know about the extra file attributes and won't update the special file). But there is a tool called umssysc which can be run to synchronize in Linux after something has been changed by DOS/Windows.
UMSDOS accepts the same uid/gui permission settings when mounted as the normal FAT partitions do. There is also an umssetup tool to set these permissions.
Booting Linux from within a DOS or Windows OS is done with loadlin.
The long filenames used by UMSDOS are incompatible with the ones used by VFAT, so when UMSDOS is used on a VFAT partition the long names won't be shown in Windows and creating long named files in the Linux directory also won't work in Windows. There is a (still a bit experimental) patch to support VFAT long names, called UVFAT.