I feel bad for this kid. That really is a bad warning dialog. Nowhere does it say it's going to delete files. Anyone who thinks that's good design needs a break.
Half the replies are basically "This should be obvious if your past five years of life experience is similar to mine, and if it isn't then get fucked." Just adding insult to injury.
My guess is that this is a teenager, and this is probably their first experience with git and version control in general. Just a hunch.
Anyway, it is reasonable to expect a mainstream GUI app from one of the largest companies in the world to be approachable for people who do not know all the inner workings of the command line tools that are used behind the scenes. And it is reasonable to expect any destructive action to have clear and bold warnings. "Changes will be discarded" is not clear. What changes? From the user's perspective, the only changes were regarding version control, so "discarding" that should leave them where they started — with their files intact but not in version control.
Have mercy on the poor noobs. We were all there once.