I'm sure everyone using Windows XP has seen a small file in some directories called thumbs.db. This file is a cache of the thumbnail pictures in a directory. It speeds up the showing of thumbnails when you are viewing a folder in Thumbnail view.

What is it???!! 

Thumbs.db is a hidden file generated automatically by Windows, you will see it in many folders if you have set the "Show hidden files and folders" option in the "Folder Options" window on. Although Windows mostly generates it to speed things up, some times it is annoying especially when you try to zip a folder or upload a folder using ftp to your site, I have found Thumbs.db in most of the folders in my site and had to delete them manually. If you delete Thumbs.db from your windows folders, Windows will generate it again when you re-open the folders if you have Filmstrip or Thumbnails selected in the View menu of those folders. If the Thumbs.db is considered annoying for you, there is an easy way to stop Windows from re-generating it, here is how.

The only drawback of the thumbs.db file is that it takes up disk space. Although this space is very small in most cases, if you have a lot of thumbs.db files littering your hard drive you may be able to save some valuable space by removing them. Follow the steps below to turn off the creation of this file and delete the thumbs.db files that are on your hard drive.

To turn this feature off, do the following:

1)Open My Computer

2) Click on Tools
3) Click on Folder Options
4) Click on the View Tab
5) Place a check in the option "Do not cache thumbnails"
6) Click Ok
7) Close My Computer

Now follow the next steps to remove the thumbs.db files from your hard drive

1) Click on Start
2) Click on Search
3) Click on All Files and Folders
4) Type the following in the section called "all or part of the file name"
thumbs.db
5) In the Look in box, make sure Local Hard Drives is chosen
6) Click Search
7) A long list of thumbs.db files should appear, click on Edit, Select All
8) Click on File, and choose Delete
9) Close the Search Results window

Although this tip isn't for everyone, if you are low on disk space and dont use the Thumbnail view to show your files, this may save you some valuable disk space.

Sources : http://www.pchell.com/support/thumbsdb.shtml

                http://www.jakeludington.com/ask_jake/20051024_what_is_thumbsdb.html

Thanks to both of you for this nice info.

Ramesh wrote Nice & Informative too. In Windows Vista, we can't find Thumbs.db files scatter around and place in many folders again. Instead, Vista will store all thumbnails and previews generated in a centralized thumbnail database. The centralized thumbnail database is located in the following folder: C:\Users\ [User Account Name] \AppData\Local\Microsoft\Windows\Explorer

strainge.... My each images folder contains thumbnail database file....