Hey Mimi,
The "Not Isdefined(application.initialized)" checks for the existence of an application variable "initialized". If it has been created, the isdefined() function returns TRUE, the NOT negates it, and the <cfinclude> is not executed.
In this case, the <cfif> statement will always run because the "or 1" always evaluates to true regardless of the first part. My guess is that's part of some debugging code that was put in to test the <cfinclude> code.
It looks like the code inside the <cfif> statement runs when the application is first run to setup global variables and such. I'm guessing someone was troubleshooting and put that in to make sure the initialization code ran even though the app had already initialized.
Hope this helps,
GJ