From Wikipedia:Working directory:
For computer operating systems that support a hierarchical file system, the working directory is the directory that will be used for files referenced by name only, or by a relative path (as opposed to files referenced by full pathnames).
In DOS and UNIX, a user may use the cd or chdir command to change the current working directory.
In UNIX, the pwd command outputs the absolute pathname of the current working directory. The equivalent command in DOS is cd without arguments. cd used without arguments in Unix takes the user back to his/her home directory (the directory in which s/he can store files and other directories by default).
The POSIX C function chdir() can be used to set the current working directory.