update-fonts-dir creates a fonts.dir file in an X font directory by invoking mkfontdir(1)? with the appropriate arguments. It is typically invoked only from the post-installation and post-removal scripts of a package containing fonts for the X Window System, but may be invoked at any time to reconstruct fonts.dir files. For each directory, which is either an absolute path to an X font directory or (preferably) simply the last component of its path (such as update-fonts-dir__ will generate /usr/lib/X11/fonts/directory/fonts.dir from the fonts.scale'' and font files found within it.
This enables multiple packages to provide names for fonts in the same directory. No font package actually provides the fonts.dir file in the X font directory itself, so there is no danger of overwriting one package's font names with those of another; For instance, the two packages /usr/lib/X11/fonts/misc, and update-fonts-dir will ensure that the fonts.dir file in that directory contains information about the font files provided by both packages.
The format for fonts.dir files is given in the mkfontdir(1)? manual page.