The Business Data Catalog is a Microsoft Office SharePoint Server 2007 feature that exposes and incorporates Line-of-Business (LOB) data into other baseline portal functionality, such as lists and enterprise search. To incorporate this data into your portal, you must build an XML file that identifies where the data is stored (either Microsoft SQL Server or a Web service) and what the data looks like (for example, what the data types and primary keys are).

You found nice article in MSDN to learn how to create an application definition file.

Article is here : http://msdn2.microsoft.com/en-us/library/bb410048.aspx