Where are the database configurations in the Magento framework?

I had to migrate a Magento store last week and since I haven't had much experience with that framework, I was at a loss with where the database configuration file was located. No matter how hard I looked there wasn't an apparent config file named config.php or any of the sort.

I did eventually find it in a very non-conspicuous place. The configurations are listed in /app/etc/local.xml. Not exactly a descriptive name for what I was looking for. You will then want to look for this block of code in that file:

I need this data only to create the database on the new server. I am not sure if changing this file will actually change the configuration of the application.