It is used to store extensions that are PPI compliant.
It is discussed in Core Concepts
The fourth mode of operation literally installs extensions into a Linux partition or a loop back file. This provides a hybrid type of installation, where core is in RAM and the extensions are installed onto a persistent storage device. I call this mode of operation of Persistent Personal Installation or PPI. The benefits are speed, as no loading or mounting occurs during boot. The same RAM savings offered by the mounted PPR/TCZ extensions is another benefit of PPI. However a possible drawback of this is losing the "pristine state" offered by using PPR. Installing applications, as done in most typical environments, can result in "system rot", i.e., over time, or via user/system error, corruption can occur and might not be readily noticeable. By choosing this method one should only use our TCE collection of extensions. The TCE collection being tar gzipped will install into the specified location. To initially setup your PPI use the boot code of local=hdXY. This will look for a directory named tclocal or a single loop back file of the same name. Note there is a menu option to create a loop back file for this very purpose. Using a PPI you don't need to keep the downloaded TCEs. No need to specify tce=hdXY as used in the PPR mode. For a "hands free" boot even the local=hdXY can be omitted. But by always specifying the local boot code will skip the autoscan and result in faster booting. Using the nolocal boot code will always ignore an existing PPI.