Its purpose is for performance optimisation, it is SSD storage on the same physical host as the virtual machine so it can be used to optimise performance for non-persistent storage items like the page file. For Windows VMs the page file is placed there by default.
https://learn.microsoft.com/en-us/azure/virtual-machines/managed-disks-overview#temporary-disk
No issues with changing this drive letter - https://learn.microsoft.com/en-us/azure/virtual-machines/windows/change-drive-letter