Loader.exe is a Win32 application that can load a .NET application after checking for the existence of the .NET Framework (specifically, MSCOREE.DLL). If MSCOREE.DLL is not found, the loader points the user to the Microsoft .NET Framework home page where they can download the .NET Framework.
The point behind all this is the avoidance of the "MSCOREE.DLL not found" error message when a user tries to execute a .NET application without the .NET Framework installed. The error message above is replaced with a much friendlier message, telling the user that they don't have the .NET Framework.
Back in the day, when Windows applications were written using the Windows API (and many still are), there was a little MS-DOS loader program embedded into the application at compile time, called the stub. This program would run when the application was run in MS-DOS mode, telling the user that they needed to run the application under Windows. It was much friendlier than allowing DOS to load the entire EXE and give an "invalid EXE file" error message, or "program too big to fit in memory".
When the PE executable format was transferred over to .NET, the same thing happened with .NET executables. Windows is currently unable to load a .NET executable if the .NET Framework is not installed. It does exactly what DOS would do with a Windows executable if it didn't have a stub: it outputs a meaningless error message. However, this time Microsoft did not embed a stub in .NET executables. Thus, NetXP's Loader.exe was born. It acts as an external stub, providing a more meaningful error message to the user.
The loader is easily configurable through the Loader.ini file. A sample Loader.ini file is provided with NetXP. You can configure whether or not you want to have a splash screen. The advantage of having the splash screen be shown by the loader is that the splash screen will be shown almost instantly, because the CLR doesn't have to be loaded (Loader.exe is a native Win32 application).
When specifying a splash screen image, you may only specify a BMP file, if you wish to be able to run the loader on Windows 98 and Me. Otherwise, you can specify JPG and GIF images as well. Along with the bitmap file, the splash screen can optionally show additional information, such as your application's version (taken directly from the executable), as well as copyright text. The text font and color can also be changed, as well as the location.
In the General section of the INI file, you must specify the file name of the .NET executable to load, and whether or not it requires the .NET Framework (sometimes you may wish to use the loader for other types of applications as well).
When launching your application, instead of launching the .NET executable, you must now launch Loader.exe.
The loader can be customized even more by using a resource modification tool such as ResHacker. With such a tool, you can open up Loader.exe and change the version info inside it to match your application. You can also add an icon to it. This is all legally permitted, but only with Loader.exe.