The C/C++ Extension is used to provide C and C++ syntax highlight, code navigation and Go to declaration/definition within C and C++ files.
The default configuration file is located in {PROJECT_DIR}/.vscode/c_cpp_properties.json and can be generated by using ESP-IDF: Create project from extension template command or using the ESP-IDF: Add vscode configuration folder command.
To enable Code Navigation, auto-complete and other language support features on ESP-IDF source files on Visual Studio Code. Please take a look at C/C++ Configurations for more detail about c_cpp_properties.json configuration fields.