post one ill take a look at it. but i believe it is what holds the settings when you reboot. aka lets say you choose "wipe data/factory reset before flashing" that is not always built into the rom's update.zip so rom manager says ok install this update.zip upon booting into recovery! and that update.zip says do all the wipes then flash this other .zip. its like a shell. i could be wrong but that is what i believe
edit: a better example of what i think it is doing is not only the wipes, but if you say "backup before flashing" too
i used to use rom manager and it always says flashing update.zip not flashing [ROM NAME].zip right.