I would assume it represents reserved dimensions for an image much like with the img width and height attributes. With DreamWeaver I assume it will reserve a space for the image in a similar fashion.
I use notepad though I have heard in DW; Choose: Insert > Image Placeholder
I believe you use it in cases where you know the dimensions a future image will use, but don't have the image readily available. This allows you to see how your layout will look even without the image in place.
In the old days of version 3.xx browsers it saved rendering time - it still does.
For example if I have image X, to save the browser time I tell it I want the dimensions to be 101 x 100 pixels so it would reserve a space of 101 by 100 before the image had loaded and not have to workout the image dimension and then adjust the other content appropriately.
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