It defines MyEclipse-specific information such as the location of the web-root folder and other important details required by MyEclipse web tools for their proper operation.
It is an optional file and may contain some project related information.
The .mymetadata file is a configuration file generated by MyEclipse to store project-specific metadata, such as the context root, web-root folder location, and project type, which are required for deployment and tooling operations.