Nothing happens to a book that you've read until you do something with it.
If it's a book that you've bought from Amazon and you remove it from your device, it will reappear in the "Archive". If it's a book that you haven't bought from Amazon, then when you delete it it will simply disappear (unless it's in the Cloud drive, or something, of course).
Merely "finishing" a book will not, in itself, do anything at all to it. You have to take explicit action.