What it means
A file exclusion skips Defender's real-time scan for one named file. A process exclusion has a wider operational effect: files opened by that process are excluded from real-time scanning. Folder and file-type exclusions can be broader still and may hide future files created in those locations.
A real-world example
A game launcher asks for an exclusion. Excluding a particular verified file is narrower than excluding every file the launcher process opens, while excluding the entire Downloads folder would cover unrelated files too.
What to do
Identify the exact false positive, consult the vendor and use the narrowest documented exception if one is truly required. Remove it when the issue is resolved.
The distinction that matters
No exclusion proves the app is safe. Microsoft notes that scheduled and third-party scans may still inspect some excluded material, so an exclusion also does not guarantee all scanning stops.
Microsoft's Defender exclusion types