This panel shows the contents of the current project. The project contains groups of files which can be opened by double-clicking or from the right-click context menu. When an item in the project tree is selected, its related properties can be seen in the Properties Window.
Projects are useful when you have a large number of related schema and xml documents. The default groups are Documents, Output, Schema and Transforms, but any number of groups can be added and the defaults can be removed using the right-click context menu.
The groups are for convenience only and have no effect on file paths.
The Project properties include the option to make all paths absolute (the default) or relative to the project file. Making the paths relative is useful if the files reside in sub directories of the project folder as it enables the entire tree to be moved. Use absolute paths is useful if your project files reside outside of the project folder.