I've never let my web hosting service expire but is it true that once it expires, the files are removed from the web server and become inaccessible?
Once hosting expires it is true that the website is deleted and files are removed. Shouldn't be a problem though, you should have made a backup regularly and downloaded the backup for safekeeping.
Domain renewal and hosting renewal are two separate things unless you get a free domain name with hosting. Never tried that so I do not know if you lose your domain free domain name or not.