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the .cue file tells where the tracks change on the cd, if the wav or mp3 file is one big file with lots of tracks on it. so when the wav/mp3 is burned with the aid of the .cue file the tracks will be separate on the cd, but with no pauses between them, therefore .cue files are pretty useful for mixed cds.
.cue files can also be used to burn data cds too, but i can't really tell any more details about that, except that they work pretty much the same way there.
and you can burn a cd using a .cue file with nero for example (and pretty much any half decent burning program).
i hope this was clear enough. didn't quite know how to put it all into words!

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