diff --git a/src/Documentation/glossary.js b/src/Documentation/glossary.js
index dbc06e458a..0c6504bf22 100644
--- a/src/Documentation/glossary.js
+++ b/src/Documentation/glossary.js
@@ -37,6 +37,13 @@ export default {
       desc:
         'Stage (DVC-file) created with the `dvc import` or `dvc import-url` ' +
         'commands. They represent files or directories from external sources.'
+    },
+    {
+      name: 'Output',
+      match: ['output', 'outputs'],
+      desc:
+        'A file or a directory that is under DVC control. See `dvc add`,' +
+        ' `dvc run`, `dvc import`, `dvc import-url` commands.'
     }
   ]
 }
diff --git a/static/docs/user-guide/dvcignore.md b/static/docs/user-guide/dvcignore.md
index bf525362e7..cae3fdb29a 100644
--- a/static/docs/user-guide/dvcignore.md
+++ b/static/docs/user-guide/dvcignore.md
@@ -1,43 +1,150 @@
-# dvcignore File
+# .dvcignore File
 
 Marks which files and/or directories should be ignored when traversing
 repository.
 
-Sometimes you might want DVC to ignore files while traversing the project
-directory. For example, when working on a project with many files in its data
+Sometimes you might want DVC to ignore some files while working with the
+project. For example, when working on a project with many files in its data
 directory, you might encounter extended execution time for operations that are
-as simple as `dvc status`. To prevent this, we are implementing `.dvcignore`
-files handling. When fully implemented, their implementation is intended to
-provide similar functionality as `.gitignore` files provide for `git`.
+as simple as `dvc status`. In other case you might want to omit files or folders
+unrelated to the project (like `.DS_Store` on Mac). To address these
+requirements we are implementing `.dvcignore` files handling. `.dvcignore` by
+design works similar way as `.gitignore` does.
 
 ## How does it work?
 
-- You need to create `.dvcignore` file;
+- You need to create the `.dvcignore` file. It can be placed in the root of the
+  project or inside any subdirectory (see also [remarks](#Remarks) below).
 - Populate it with [patterns](https://git-scm.com/docs/gitignore) that you would
-  like to ignore;
-- Each line should contain only one pattern;
+  like to ignore.
+- Each line should contain only one pattern.
 - During execution of commands that traverse directories, DVC will ignore
-  matching paths;
-- Not every operation supports `.dvcignore`. To see current limitations, read
-  following paragraph.
+  matching paths.
 
-## Current limitations
+## Remarks
 
-During development, we noticed that there are few potential uses cases that
-might be tricky to handle (e.g. what to do when we are `dvc add`-ing directory
-containing `.dvcignore` file). Therefore, we decided to enable this feature
-gradually in different parts of the project.
+Ignored files will not be saved in cache, they will be non-existent for DVC.
+It's worth to remember that, especially when ignoring files inside DVC-handled
+directories.
 
-Currently `.dvcignore` files will be read and applied in any operation that
-collects DVC-files (e.g. `checkout`, `metrics`, `status`, `run`, `repro`), so it
-is advised to use it in cases described in the first paragraph, when amount of
-files in tree of repository directory causes performance issues.
+**It is crucial to understand, that DVC might remove ignored files upon `dvc
+run` or `dvc repro`. If they are not produced by a
+[pipeline](/doc/get-started/pipeline) step, they can be deleted permanently.**
+
+Keep in mind, that when you add to `.dvcignore` entries that affect one of the
+existing <abbr>outputs</abbr>, its status will change and DVC will behave as if
+that affected files were deleted.
+
+If DVC stumbles upon `.dvcignore` file inside a dependency or an
+<abbr>output</abbr> directory, it raises an error. Ignoring files inside such
+directory should be handled from `.dvcignore` file from upper levels of the
+project tree.
 
 ## Syntax
 
 The same as for [`.gitignore`](https://git-scm.com/docs/gitignore).
 
-## Example
+## Examples: Modification of ignored data
+
+Lets see if what happens when we modify ignored file.
+
+```dvc
+$ mkdir data
+$ echo data1 >> data/data1
+$ echo data2 >> data/data2
+$ tree .
+
+.
+└── data
+    ├── data1
+    └── data2
+```
+
+We created the `data` directory. Lets ignore part of the `data` and add it under
+DVC control.
+
+```dvc
+$ echo data/data1 >> .dvcignore
+$ cat .dvcignore
+
+data/data1
+
+$ dvc add data
+$ tree .dvc/cache
+
+.dvc/cache
+├── 54
+│   └── 40cb5e4c57ab54af68127492334a23.dir
+└── ed
+    └── c3d3797971f12c7f5e1d106dd5cee2
+```
+
+As we can see, `data1` has been ignored. Cache contains only one file entry (for
+`data2`) and one dir entry (`data`).
+
+Now, lets modify `data1` and see if it affects `dvc status`.
+
+```dvc
+$ dvc status
+
+Pipelines are up to date. Nothing to reproduce.
+
+$ echo "123" >> data/data1
+$ dvc status
+
+Pipelines are up to date. Nothing to reproduce.
+```
+
+Same modification applied to not ignored file will make `dvc status` inform
+about change:
+
+```dvc
+$ echo "123" >> data/data2
+$ dvc status
+
+data.dvc:
+	changed outs:
+		modified:           data
+```
+
+## Examples: Moving ignored data
+
+```dvc
+$ mkdir data
+$ echo data1 >> data/data1
+$ echo data2 >> data/data2
+$ tree .
+
+.
+└── data
+    ├── data1
+    └── data2
+
+$ echo data/data1 >> .dvcignore
+$ cat .dvcignore
+
+data/data1
+
+$ dvc add data
+```
+
+If we move not ignored data, DVC will behave as if we modified data directory by
+adding new file:
+
+```dvc
+$ dvc status
+
+Pipelines are up to date. Nothing to reproduce.
+
+$ mv data/data1 data/data3
+$ dvc status
+
+data.dvc:
+	changed outs:
+		modified:           data
+```
+
+## Examples: Ignore dvc controlled file
 
 Lets analyze an example project: