system directory is created when you first start your JDeveloper and it keeps storing the IDE settings thereafter. The default location on Windows for the JDeveloper 11gR2 release Version 22.214.171.124 is:
To see some information in the system folder, the JDeveloper IDE should be loaded completely and should not be interrupted during startup. The DefaultDomain folder will be created when the integrated server is started for the first time. Other folders in the system folders are also created when the component is accessed for the first time. The following screenshot shows the system folders, their files, and their description: ...