Force.com IDE Developer Guide
jAbout Metadata Files
The Lightning Platform executes applications in its multi-tenant environment through a concept known as meta-customization. Application components such as schema definitions, page layouts, workflow rules, even classes and triggers, are stored in a database, just like data in a traditional single-tenant application. These database records that describe the application itself are called metadata components. Because they are stored in the database and loaded at runtime, metadata components can be created and modified on the fly by manipulating these records using the Setup pages of your Salesforce organization.
The Force.com IDE brings these metadata components into the context of traditional source code based application development by presenting them as text files. In the IDE, you work with metadata files that define Apex classes and triggers, custom objects, custom fields, Visualforce pages, and other metadata components, and then synchronize these artifacts back to your home organization (a sandbox or Developer Edition environment).
Because the files are text-based, these metadata files can be created or modified in a text editor, compared using text diff tools, managed in a version control system such as CVS or Subversion, and even deployed from one Salesforce organization to another.