The UserConfig.xml file is generated by the sequencer for you to modify when you want to alter the way the package integrates with the system. The UserConfig makes changes on a per-user basis.
Microsoft has done a half-hearted job to define the syntax, with more of an example than definition; this is a more serious attempt to provide a concrete definition. This is a work-in-progress, as portions of the definition not properly documented are yet to be understood.
This XSD file that can be used in an XML editor to create and/or validate the syntax. It is known to not work with NotepadXML for some unknown reason, however the files output by the sequencer appear to have xml validation issues against many validation tools, even without this schema.
Click to download UserConfig Schema XSD (Zipped)