Thank you for this feedback. You are totally right in pointing out that this text is very unclear and I will make a request to get this changed.
This is to delete just the link, not your file in the cloud. On the left side options, it looks like you are on "Prototypes" which is all the prototype links you have. If you were under "Files", then, you'd be managing all the files you have in Creative Cloud Files which could include the XD document itself.