As per the documentation (https://learn.microsoft.com/en-us/azure/storage/common/storage-introduction), I understand file storage can be used for storing logs, pictures, etc. The documentation also mentions about HTML files. Does that also mean the files such as CSS, JS, Images, etc that are part of source code should be stored in Azure File Storage, or only the files that forms data for application be stored?
Azure Storage is just... storage. Put anything you want there, really. You can store objects up to 4.7TB. It's durable storage (triple-replicated, non-volatile). And with different options for geo-replication.
Any object in Azure Storage can be programmatically accessed, or accessed via direct uri. Therefore, you may use Storage to contain assets for an application (images, stylesheets, whatever you choose). If you store source code, though, you'd have to build some way of downloading that source code to your target (VM, for example), and compile/run it from there. And how you do that is up to you and your approach to deploying code. (note: I'm not advocating doing that; just pointing this out).
Azure Storage isn't a file system or part of an operating system; you cannot execute code residing in Azure Storage.
And... Azure Storage is independent (as a service) to Web Apps, Virtual Machines, Functions, or any other service. You're free to access Azure Storage from any of those services, of course. And Virtual Machines utilize Azure Storage for their OS and Data disks. But... it's just a general purpose storage service.
What you choose to store there is totally up to you.