I think they are stored in your OneDrive account.
When you reset your phone you will have to go through all the set up as you would with a new phone but to get to the restore bit you have to sign into and be connected to wifi (any) and then you will get a page asking you if you want to restore from a backup or set up as new. If you pick the restore option you will then be given a list of your backupsou will even be given a list of backups you made on other phones.
Pick the backup you want to restore and tap next. Now if you are restoring from a backup made while the phone was on 8.1 then it will restore everything including what and where your tiles are plus your settings providing you chose to backup those settings.
Some of the apps that need special permission will show as needing attention so you will have to agree to them to install them. Also you will have to go into battery saver and pick what you want to run in the background again as it will just allow everything again. There are some other settings like notifications that you will need to go over again.
I'm sure others will have more detail to add.