Should I create this file on my server and what should I put in it? Is it similar to the spider = index, follow tags?
It lets you specify what you don't want search engine spiders to look at... http://www.google.com/webmasters/3.html#B3 - Shawn
I wrote an article a while back that covers the basics of robots.txt This may help you a little. Create Robots.txt File
A great place to start read about it will be here www.robotstxt.org tells you everything you ever need to know about robot text file.
The Robot Exclusion Standard, also known as the Robots Exclusion Protocol or robots.txt protocol, is a convention to prevent cooperating web spiders and other web robots from accessing all or part of a website.