allows you to cheat. I'm lazy, but do a search on the forums, there's a list of cheats somewhere. once you change it from cheatmode=0 to cheatmode=1 and enter the game you can use all the cheats.
The ones i remember are ctrl+click on the map teleports you
ctrl+x at inventory gives 1000 gold (unless the amount changed with new patch)
ctrl+x at character screen gives exp (i never payed attention to how much)