What is the deal with ".idea" directory for storing project files.

I recently started a new project placing the project files under a ".idea" directory which is in the root of my project (makes version control ignoring easy and keeps it from poluting the project files). Oddly IDEA sees the project directory as a special directory, the following odd behaviour is exhibited:

• Gives the project directory an IntelliJ icon, and the directory can be opened via "Open Project"
• The .idea directory contains a heap of XML files, looks like configuration.
• The iws is not required, seems to be replaced by the .idea/*.xml configurations
• The iml is still required.

Searching for ".idea" yeilds nothing (can't search for the ".").

Can anybody explane whats going on here?