The current working directory is the directory on your filesystem where all file system commands made within TKE are executed relative to. The current working directory is used in a few contexts within TKE:
The current working directory is stored in the session data so that it is always remembered from session to session. The current working directory is always displayed in the TKE title bar within the square ([]) brackets.
There are a few different ways to change the current working directory within TKE.
Selecting the File / Change Working Directory menu option will display a file browser that will allow you to select a directory to make the current working directory.
Right-clicking on any directory within the sidebar will display the contextual menu for the directory. Select the Make Current Working Directory option to make the selected directory be the current working directory.
If the preferences Automatically set the current working directory to the current tabs directory General option is selected, selecting a tab in the tab bar will cause the current working directory to be automatically set to the directory containing the selected file. Note that selecting a tab which does not show a file from the file system will not cause the current working directory to be changed.