The Microsoft Dynamics CRM metadata contains the description of system and custom entities, attributes and the relationship between entities for an organization. The MetadataService Web service provides the messages that you can use to read or write the metadata. In Microsoft Dynamics CRM 3.0 you used the MetadataService Web service to read the metadata. In Microsoft Dynamics CRM 4.0 you have ability not only to read, but also to change the metadata.
Visual representation of the metadata can be very useful, especially when you are trying to describe the relationship between the entities in the system. The Microsoft Dynamics CRM 4.0 Software Development Kit (SDK) contains the Metadata Diagram tool that uses the metadata to generate the entity relationship diagrams. You can create a simple diagram that shows a relationship for just one entity, or a very complex diagram that includes dozens of related entities. You can create the diagrams that show the relationship between custom and system entities.
To learn more about the Metadata Diagram tool, read the MSDN article at http://msdn.microsoft.com/en-us/library/dd393302.aspx.