To put it in perspective, restricted economy is discounted economy, the most commonly used airfare type, as opposed to "normal" (misnomer), unrestricted, or full-fare economy which allows full flexibility such as rerouting/reticketing within mileage or by settling the difference, etc. In restricted economy there's a whole spectrum of possible restrictions of the kinds spelt out by other members (and things like advance purchase, limitations on changes/refunds, etc etc), the devil being in the details applicable to the particular offering. So read the terms and conditions. Restricted economy costs less than full-fare economy (but of course).
Little to do with actual seat location within the economy cabin (the person sitting next to you may have paid a lot more or less than you). And no you don't sit amidst your luggage in the hold (!!
) or the cabin.