GAE/GWT local_db.bin Magic Read

I have a GAE/GWT project.  I have it create an exploded directory, where I see the local_db.bin being created.  I am doing testing, so I am wanting to clear the datastore after every run.  I delete the local_db.bin out of the exploded directory, thinking that I have deleted the datastore.  When I rerun my GWT debug, I see that it is reading in the datastore, but I don't know where it is reading it from.

Can someone please explain what is happening with this magic read?

Thanks,
Jeffrey