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That folder holds the install files that are on the Windows CD. Pretty much just a copy of the CD.
It comes in handy when you're installing say a new piece of hardware or something, or changing settings, so that instead if Windows asking you to "Please insert the Windows CD..." it just automatically gets the files, and saves you time.
I would leave it. If it's just annoying/clutter to you, just right click on it and select properties. Then make it "Hidden"...
David
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-David
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