- Is this a known feature?
- How IE can know my file browsing history?
As mentioned in the answer by RoraZ, Internet Explorer is (or at least, was originally designed as) largely an extension of the system file browser (explorer.exe), and they share many components and operations. Specifically, what you're seeing is that Internet Explorer is accessing and using the MRU (Most Recently Used) file list that explorer.exe is putting .txt files into. Because IE and explorer.exe are so closely related, this is not unexpected, and should apply to other file types that are either associated with Internet Explorer, or openable with Internet Explorer as well.
Basically, the Windows operating system stores MRU lists in the registry, and Internet Explorer is accessing that list and including it in your history, based on a filter of associated or openable file extensions.