What does "Share iTunes Library XML with other applications" do?

If the box is ticked iTunes should (re)generate an iTunes (Music) Library.xml file in the same location as the .itl file whenever there is a change in the library. The exact name may differ depending on the library location and name. This used to be the default option, but no longer is.

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The XML file can potentially be used to rebuild a lost .itl file, however on import to an empty library each file needs to be at the location recorded for it in the XML file (can be edited if say the files are now on a different path), date added details will be reset, and iTunes will updated with any current embedded metadata rather what is in the XML file.

See Backup your iTunes for Windows library with SyncToy - Apple Community for my advice on backups. If you want the potential to recover from corrupted metadata it may be better to take the occasional snapshot of the .itl file. I have a script called ExportImport that can be used to export data from one .itl file (it may be necessary to temporarily rename the media folder so that iTunes cannot read the "current" metadata) and then import into another.

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Does this mean I can then do "File > Library > Export Library..." (image below)...

...and then save an XML file (image below) so I can import said XML file at a later date to restore my Library as it was at that time?

Will all the metadata I manually filled in on tracks I imported be saved? Comments and all? (image below)

I'm just asking before testing myself cuz I don't wanna destroy all the work I've done over the years. :)