APN files? what do they do?

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I am completly new at flashing androids and I have good luck in getting Talk and text and Web. Handling the MMS has had me sitting at the computer for hours researching. I know that it involves modifying or replacing the apn file. What I am not sure of is what the APN file actually does. I have searched on this site and all others that have anything to do with Androids and there is very little Information on APN files. I have opened the APN files with the voice dialer and seen all the settings but I am not sure how they deal with data.
I saw a droid that had been flashed to our local carrier and he had an APN file folder on the home screen. Is that different than getting into the APN manager and adjusting the settings?
Can anyone expand on the subject.

What do they do?
How does one find out what settings are needed for a particular carrier?

If this has been covered somewhere, please excure my failure in finding it.

Thanks!