Using the configuration file fpc.cfg is an alternative to command line options. When a configuration file is found, it is read, and the lines in it are treated as if you had typed them as options on the command line: Specify one option on each line of the configuration file. They are treated before the options that you type on the command line.
You can specify comments in the configuration file with the # sign. Everything from the # on will be ignored.
The algorithm to determine which file is used as a configuration file is described in 3.1.5 on page 81.
When the compiler has finished reading the configuration file, it continues to treat the command line options.
One of the command line options allows you to specify a second configuration file: Specifying @foo on the command line will open file foo, and read further options from there. When the compiler has finished reading this file, it continues to process the command line.