Choose a preference to specify where the settings are stored. The XMP files are useful if you plan to move or store the image files and want to retain the camera raw settings. You can use the Export Settings command to copy the settings in the Camera Raw database to sidecar XMP files or embed the settings in Digital Negative (DNG) files.
When a camera raw image file is processed with Camera Raw, the image settings are stored in one of two places: the Camera Raw database file or a sidecar XMP file. Settings for DNG files are typically stored in the DNG files themselves, as with TIFF files.
You can set a preference to determine where settings are stored. When you reopen a camera raw image, all settings default to the values used when the file was last opened. Image attributes (target color space profile, bit depth, pixel size, and resolution) are not stored with the settings.