No, look again...
It says "writes zeros over the unused space in the disk ..."
That process simply records data (in this case, zeros) to all the unused/blank space. It's mostly used for security purposes, so that erased files are less likely to be recovered. It's also hard on the drive, so I wouldn't do that Erase Free Space very often.
The theory behind Erase Free Space is that normally when you erase a file, the data still exists, and the hard drive directory is simply changed to 'forget' about that data. It's still there until it is replaced by newer data. The Erase Free Space does that to all the free space at that same time.
The process does not change your disk directory, so the used/unused space would not change, and your existing files are not affected by that process.