Application Data Folder

The Application Data Folder is part of your user profile. It is customedized controls for the programs that have been installed for the user. Programs such as Outlook and Outliook express can store their mail databases there. It is not a good idea to remove anything from there.
In this folder applications store their files your settings and much more.

On Windows XP you can find this folder on the path:
C:\Documents and Settings\%UserProfile%\Application Data

On Windows 7 the Application Data is not an actual folder, it is a Junction which is only there for backward compatibility. A Junction is a shortcut that redirects files and programs to a different location. You can find the Application Data junction in the next path:
C:\Users\%UserProfile%\AppData\Roaming