HOME-ETC is an idea to keep configuration files in a subdirectory specified by user, instead of his home directory. The reason was I don't like a rash, and my home directory has started looking like that.
The idea has arised on the occasion of developing PLD Linux/GNU distribution, where it is developed till now. Many applications need to be patched, and the HOME-ETC library is a helper to not write the same thing more than once.
HOME_ETC is a pathname container. It may be obtained in two ways: using the environment variable of the same name, or using a file inside user's home directory. The filename is .home_etc. The second method must be provided because of applications, which cannot touch user's environment (MTAs, identd, and other daemons). However, in PLD we're setting things up by invoking /etc/profile.d/home-etc.?sh scripts, which are setting the correct environment variable according to information found in the file (see sources for details).
You can find more detailed description in the related manual pages.
Pawel Wilk <siefca /a/ gnu.org> There was also a lot of other people, who have contributed to this code and/or helped with patching applications. See the AUTHORS and the CONTRIBUTORS files.