What happens behind @Retention in java 1.5

I am trying to understand storage policy with Java 1.5. But not getting a clear picture.

Like for JavaDoc ,

• CLASS - Annotations must be written to the class file using the compiler, but there is no need to save the VM at runtime.
• RUNTIME - Annotations must be written to the class file using the compiler and saved by the VM at runtime, so they can be read reflexively.
• SOURCE - Annotations should be discarded by the compiler

• what does it mean "dropped"?
• Does it look like the class file does not have a specific annotated element in it, putting it in SOURCE?