As Mollyi says, that disc contains Construction Set program (so since you can for example uninstall CS but not Morrowind, with this CD you can install CS anew). It also contains absolutely all the files used in Morrowind, including some meshes/textures/etc that are not present even in the original games and is mostly used for taking out the original content for editing it. So basically it has no use aside from being a modder's morrowind cd
Correction: They are supplied with the original game. All of the texture and mesh files are in .bsa files. When I had lost my CS disc, I had started unpacking the BSAs instead, but not to my default install dir.
The CS disc is just convenient in that they are all already unpacked and in the right directory structure.