As the javadoc says, you are inflating a layout resource by its id:
public void setContentView (int layoutResID)
Added in API level 1 Set the activity content from a layout resource.
The resource will be inflated, adding all top-level views to the
activity.
Parameters : layoutResID -> Resource ID to be inflated.
http://developer.android.com/reference/android/app/Activity.html#setContentView(int)
The Bundle object have information to restore your activity to a previous state.
The saved data that the system uses to restore the previous state is
called the "instance state" and is a collection of key-value pairs
stored in a Bundle object.
http://developer.android.com/training/basics/activity-lifecycle/recreating.html