How is config.xml populated

I am looking after a system that contains multiple databases (my area of expertise) and a number of weblogic servers. Our system runs non-clustered managed servers on different physical machines so I have been trying to learn as much as possible about the basics of weblogic.

To this end, I installed welogic on a Windows 64bit machine where my intention was to create a single domain that spanned two physcial machines. I had a look at documentation and from what I found I came up with the following steps

Install weblogic server on both machines  using wls1035_generic.jar one called local one called remote