MEMORY.md lives at the root of your project or in ~/.openclaw/. It holds facts that should persist across every session: your preferences and project conventions. Anything the agent should always know goes here.
OpenClaw loads MEMORY.md into the system prompt at the start of every conversation. Lines after get truncated, so keep it concise. What happens if you need more space? Create separate topic files like memory/debugging.md and link to them from MEMORY.md. The agent can read those files on demand without bloating the prompt.