The swap file is an area that is set aside and is used as extra system memory (That is put simply).
It has nothing to do with timeshift or the epg and some people don't even bother using one.
Mine is on the microsd along with epg and picons.
EDIT:
[FONT="]A swap file (or swap space or, in Windows NT, a pagefile) is a space on a [/FONT]hard disk[FONT="] used as the [/FONT]virtual memory[FONT="] extension of a computer's real memory ([/FONT]RAM[FONT="]). Having a swap file allows your computer's [/FONT]operating system[FONT="] to pretend that you have more RAM than you actually do. The least recently used files in RAM can be "swapped out" to your hard disk until they are needed later so that new files can be "swapped in" to RAM. [/FONT]