The original purpose of an embeds.xml file was to help the original WowAce Updater program identify the libraries used in your addon, so it could correctly download them users who preferred standalone libraries. I used to be one of those, as using standalone libraries will speed up logins and UI reloads by a fairly huge amount if you're using a lot of addons, but after switching from a mechanical HDD to a shiny new SSD a couple years ago, it doesn't make that much difference anymore, and adds a lot of clutter in the addon folder, which I'm looking at a lot as an addon developer, so I no longer install my libs standalone.
Anyway, nowadays the only reason to use an embeds.xml file (or any other XML file that just loads other files) is to keep your TOC more readable, but how often are you really looking at that?
