What is the Hudson Workspace?

The hudson workspace on the PC is located in your profiles directory. There is a workspace per job created. Hudson uses the workspace to manage the current build files and previous build files. Artifacts stored in the workspace can be retained per build if configured which allows you to keep and then view previous builds' history.

C:\Documents and Settings\yourname\.hudson\jobs\your Job Name\workspace

Why is this useful?

If lets say, the build failed and you are unsure why and you used the screenshot command to capture the output, you can easily link to that captured screenshot which is saved per that build and then diagnose the issue.