I would guess that HIBERFIL.SYS is used during system hibernation to store an image of the system memory and other current settings (eg screen image, CPU registers etc) so that it can be restored to the state it was in afterwards in a few seconds.
Saw this somewhere on another forum awhile back and kept it:
During hibernation, all devices are powered off, and the system’s physical memory is written to disk in the system hibernation file, \Hiberfil.sys.
You'll need to turn off the "Enable Hibernate" by going to:
Start->Settings->Control Panel->Power Options and then select the "Hibernate" Tab and De-Select the "Enable Hibernation" check box.
After you do this WinXP will delete the hiberfil.sys file next time you re-boot.
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