When a custom Configuration path is defined during installation, it is written to the ConfigurationSetup.cfg file. That defines the root Configuration directory in the _USTN_CUSTOM_CONFIGURATION configuration variable. The msconfig.cfg includes the ConfigurationSetup.cfg as follows:

%if exists ($(_USTN_INSTALLED_CONFIGURATION)ConfigurationSetup.cfg)
%  include $(_USTN_INSTALLED_CONFIGURATION)ConfigurationSetup.cfg
%endif

Here are the contents of the ConfigurationSetup.cfg, as delivered:

#----------------------------------------------------------------------
#  ConfigurationSetup.cfg - Configures the root Configuration directory
#  for Your Organization
#
# The main function of this configuration file is to allow user to specify
# the root Configuration directory to activate. The active Configuration
# directory is represented by _USTN_CONFIGURATION. By default, it points to
# the installed Configuration defined by _USTN_INSTALLED_CONFIGURATION,
# which can consist of example WorkSpaces and WorkSets.
# If your organization has its own Configuration directory, you can define
# _USTN_CUSTOM_CONFIGURATION to that directory path and use it as follows.
#
#_USTN_CUSTOM_CONFIGURATION = D:/.../MyConfiguration/
#_USTN_CONFIGURATION : ${_USTN_CUSTOM_CONFIGURATION}
#----------------------------------------------------------------------

#----------------------------------------------------------------------
# START: The section defines user selection at the time of installation.
# These lines are generated by installer.
[General]
_USTN_CUSTOM_CONFIGURATION=

[SetConfiguration]
%if !defined (_USTN_USER_CONFIGURATION)
%if defined (_USTN_CUSTOM_CONFIGURATION) && ($(_USTN_CUSTOM_CONFIGURATION) != "") && exists ($(_USTN_CUSTOM_CONFIGURATION))
_USTN_CONFIGURATION = $(_USTN_CUSTOM_CONFIGURATION)
%endif
%endif

If a Custom Configuration location is not defined during installation, then _USTN_CONFIGURATION points to the Delivered Configuration folder defined by _USTN_INSTALLED_CONFIGURATION. If a Custom Configuration location is defined during installation, its path is set in _USTN_CUSTOM_CONFIGURATION.