config.inc.php is the name of phpMyAdmin's configuration file. It must exist in the phpMyAdmin top level directory (where you can find the Documentation.html as well) but not in ./config/ or any other subfolder and must be readable by php.
First phpMyAdmin will load the distribution defaults (located in ./libraries/config.default.php, please do NOT edit THIS file), then over-ride those values with anything occurring in ./config.inc.php. Make sure to have $i=0; $i++; before the first $cfg['Servers'][$i][...]. If any value does not appear in config.inc.php, the default is used. See the Quick Install page for more information.
You can also see a list of configuration directives as part of the file Documentation.html shipped with your distribution. There you can find an explanation of each directive if you desire to customize your installation. Here an often asked example for multi server setup. More simple config.inc.php files are provided on the Quick Install page.
Caution: some distributions (e.g. debian ) include their configuration settings from /etc/phpmyadmin.