When we create a project, information about project is stored in project file. Extension of project file can differ depending on the choice of language (.vbproj for VB, .csproj for C#), but they all store same information and are XML formatted.
We add different files, references to dlls/other projects/com components in a project and all this information is stored by the project file, so that when we open the project next time you need not to include/add them again. We can open the project file in any text editor and read/understand the content.
Apart from the file and references, all project related information/configuration is also stored in a project file. e.g. Project Output type, Configuration, RootNameSpace, Build Events, Platform and so on.
What will happen if we delete the project file? If we delete project file, we can create a new project file from visual studio and add all the files, references again. We will also have to set all the configuration which we might have done in previous project file.