Barely-documented! I've never heard of it before, and I'd bet that the vast majority of people haven't. That's the kind of thing that's dangerous.
(On a sidenote: I don't pretend to be a Windows expert -- I'm not. I haven't touched Windows for more than a couple minutes in probably 2 years)
Now that we've had that refresher, I'll correct you. The application manifest has been an important part of Windows application development since Windows XP came shipped with version 6 of the common controls (comctl32.dll) and side-by-side versioning. The side-by-side versioning support in Windows XP allows developers to sidestep "DLL Hell" and install multiple versions of assembly modules (.NET and native) on the same machine. Including an application manifest is one of two ways (the other being programmatic) to enable Windows XP Visual Styles to be used on an application and to specify specific versions of assemblies to be imported.
The vast majority of people don't have to hear of it because it's a developer's tool.
It has been part of the Platform SDK documentation since 2002. I'm sorry you've never heard of it.