This is because the item that you are feeding into Copy-Item is the folder, not the files inside the folder.
When you execute:
Copy-Item -Path c:\temp -Include "*.txt" -Destination C:\temp2
You are saying: Copy Item, where the Path is the folder c:\temp. The only item that is selected to copy is the directory c:\temp. Then we say, only -Include items that match "*.txt". Since the only item (the folder "temp") does not match the pattern, we do nothing.
To prove this, let's change the Include filter to "temp", and re-execute it:
Copy-Item -Path c:\temp -Include "temp" -Destination C:\temp2
Voilà! in the destination folder, we have a new empty folder: c:\temp2\temp. (It's empty because the only item we told it to copy was the folder "temp", we did not tell it to copy anything else)
So for part 2, When you execute:
Copy-Item -Path c:\temp\*.txt -Destination C:\temp2
It works because you are saying, with the *.txt, iterate through all items in the directory that match the pattern *.txt, feed those paths to Copy-Item, and copy to the destination.
To prove this, let's change it, and specify an include filter:
Copy-Item -Path c:\temp\* -Include "*.txt" -Destination C:\temp2
We are saying here, get all items in the folder c:\temp (i.e. we are getting all the items inside the folder c:\temp, and not the folder c:\temp), filter them by only including items that match "*.txt", and copy to the destination.
