The sakai.properties file is a central configuration file that is typically stored in a /sakai subdirectory relative to the Tomcat home directory ($CATALINA_HOME). It is a non-XML text file containing a series of key/value pairs that can be read using the load method of java.util.properties. Settings in sakai.properties govern everything from setting your institution name to configuring your database. All settings in sakai.properties are only read on startup; thus any changes you make will only take effect when you restart Tomcat.
The default sakai.properties file is located in the Components API project module:
sakai-src/component/component-api/component/src/config/org/sakaiproject/config/sakai.properties
A sample sakai.properties file which documents many of the standard properties can be found in the Reference module:
sakai-src/reference/docs/sakai.properties
To override the defaults you can create your own sakai.properties file either from scratch or from a known working copy. New key/value settings can be added to the sakai.properties. Since any component property can in principle be overridden here, any sample sakai.properties will show only a small fraction of all the possible settings.
If you checkout a copy of sakai.properties from our SVN repository make sure it corresponds to the version of Sakai you are using (e.g. Sakai 2.5.x):
$ svn co http://source.sakaiproject.org/svn/reference/branches/sakai_2-5-x/docs/sakai.properties