The west manifest is a configuration file in YAML format that defines project dependencies of a west workspace. It contains the list of repositories used by the SDK and specifies the revisions that are expected for each of these repositories. It can also include overrides and other parameters that are related to building and flashing firmware.
Manifest files allow you to quickly and consistently replicate the development environment.
When you create a west workspace, you set up a manifest repository with one west manifest file. By running west update at the end of the workspace creation process, you populate this repository with a series of project repositories that are managed by west. Each of these projects also comes with a manifest file. This way, you will end up with several west manifest files in your workspace. You can switch between them when you are working in different project repositories.
You can read more about the west manifest structure and configuration on the West Basics and West Manifest pages of Zephyr's documentation about west.