That is the entry:

Exec=sh -c "if [ -n \\"\\$*\\" ]; then exec emacsclient
--alternate-editor= --display=\\"\\$DISPLAY\\" \\"\\$@\\"; else exec
emacsclient --alternate-editor= --create-frame; fi"

My interpretation so far is: If files where given as arguments then
start in a certain display and use the current opened frame .
If files were not given then create a new frame.
But it doesnt make much sense to me. Also why  sh %F and not %F ?
And why in the latter case display is not being set ?

Alexandros.