It's a directive for VIM to set the tabstop to 2, the shiftwidth to 2 and to enable the expandtab option. The tabstop variable sets the ratio of tabs to spaces

It's a directive for VIM to set the tabstop to 2, the shiftwidth to 2 and to enable the expandtab option. The tabstop variable sets the ratio of tabs to spaces (in this case, one tab is equivalent to two spaces). The shiftwidth variable controls how much a line gets moved when it gets "shifted". In VIM pressing << in Normal mode on a line does a left shift. With a shiftwidth of two, it will move it over two spaces to the left. >> is right shift. There are many more ways of shifting, however. The expandtab option sets it up so that every time you hit the tab key, VIM will insert the equivalent number of spaces according to the tabstop. In this case, pressing tab will give you two spaces.