In one of the latest snapshots for 1.3 , they built in a function so that you the server owner can recommend a texture pack and have a link put in the server.properties file. When you join a server that has this feature enabled, your client will ask you if you want to download the recommended texture pack. If you say yes this folder will be used to cache the pack while downloading.
I see. Thanks. (I am indeed in a snapshot.) Just wondering, how does one allow more than one skin to be processed in a lan server?
I assume you mean player skins? Just enable the online mode and make sure it has an internet connection. Alternately, keep it in offline mode and use an authentication plugin. (I'm told such things exist, though my server knowledge is bordering non-existent)