What is meant by MIME?

Answer 1:
MIME is Multipurpose Internet Mail Extensions is an Internet standard for the format of e-mail.
However browsers also uses MIME standard to transmit files.
MIME has a header which is added to a beginning of the data.
When browser sees such header it shows the data as it would be a file (for example image)

Some examples of MIME types:

audio/x-ms-wmp
image/png
application/x-shockwave-flash

Answer 2:
Multipurpose Internet Mail Extensions.

WWW's ability to recognize and handle files of different types is largely dependent on the use of the MIME (Multipurpose Internet Mail Extensions) standard. The standard provides for a system of registration of file types with information about the applications needed to process them.
This information is incorporated into Web server and browser software, and enables the automatic recognition and display of registered file types.

Let us see in detail.

Mime Types represent file types as presented to your web browser.
The Mime Type option in the Control Panel allows you to specify which types of files you can open with your web browser.

Adding / Changing Mime Types:

From the Control Panel, select the Mime Type icon.
The Mime Types Manager opens.

From the Directory drop-down list, select the directory to which the mime type additions or changes are to be applied. All sub-directories under the selected directory will be affected.

Click on the Load button. The Mime Type Manager screen reappears with additional instructions.

For an additional explanation and listing of mime types select the here link located under the How to add a new Mime Type explanation.

The following web site will appear, which, in addition to explaining and listing mime types, also provides access to other mime type resources.

From the List of Mime Types section of the Mime Type Manager screen, type the mime type and the file extension for that mime type in the appropriate fields.

Select the Add button. The Mime Type Manager reappears with the newly added mime type listed under the List of Mime Types section.

To change the file extension for an existing mime type, you must first use the Delete link located next to that mime type in the List of Mime Types section.

Then enter the mime type and the new file extension for that type in the appropriate fields. Click on the Add button to continue.

Note: In order to use the Mime Types option, the Microsoft FrontPage Extensions option must be disabled. If it is enabled, then you must use your version of Microsoft FrontPage to handle mime types. If the Microsoft FrontPage Extensions option is enabled, you will not have access to the Mime Types option.