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For security and stability reasons, iOS locks down the filesystem pretty tight. When an application is installed, the iOS creates a directory under /User/Applications on the device using a unique identifier. The application is installed into that directory, and a standard directory structure is created for the app.
Since most Core Data applications want to read and write data, the template sets up our Core Data stack to read and write from the Documents directory. An application can figure out where its local directories are by using the NSSearchPathForDirectoriesInDomains, just like the template does in the App Delegate: