There was a parody article somewhere on the internet that was basically the personal logs of the Enterprise-D's holodeck maintenance guy. It implied that Riker would use the holodeck instead of his personal bathroom and had an extensive collection of programs for that purpose, like a toilet in place of the captain's chair on the bridge, complete with the rest of the bridge crew.
Considering some of the programs Quark peddled to customers, this is one of the less disturbing things people leave behind on holodecks.
Anyway, as to what actually happens to it, above poster has it. The holodecks are tied into the replicator system, it can create real food and permanent props as appropriate (I've always assumed this is also how characters get appropriate costumes - the replicator pattern is included in the program). The waste disposal system is part of the replicator system, too, just working in reverse, converting matter into a storeable form that can be used to replicate other matter.