Here we define the Appearance part of the Shape node. You might notice that "appearance" is listed twice -- why is this? This is actually a quirk of the VRML 2.0 specification. What is happening here is that we're telling the browser, "Hey, there's an Appearance node coming up" -- that's why we write "appearance", and then we actually define the appearance Node itself, which starts with "Appearance". So you can think of the first appearance as a "warning" to the browser, while the second Appearance is the start of the actual Appearance node.
In any case, the Appearance node dictates the look of the Shape, including color, texture, and other types of options.