Anupam, the warning as it describes tells you that your instance is expected to shutdown gracefully within 2 minutes. 2 minutes is sufficient time for an instance to stop/kill all user processes and system services, flush pending buffers back to disks, any cleanups and shutdown without data loss. More specifically if you have data stored in RAM but not flushed to disks, you would lose this data.
Google Compute Engine provides Snapshot functionality for persistent disks which provides taking backups at various times as you choose. This gives you freedom to go back to an earlier version if you want to.
You can also use Google Cloud Storage for files where you care about durability and availability. You can always access these files on your VM when needed.
The storage model also depends on your application. You need to plan for failures if your application needs to be resilient to them. In distributed systems, failures are unavoidable and can happen at all layers in your stack - both in hardware and software.
Here is a good guide on choosing the right Storage option on Google Cloud based on your application.