What is the use of PCO Information Element?

Answer 1

Protocol Configuration Option Information Element has been introduced with the intention of Backward Compatibility. You can use it in number of session management messages. Here backward compatibility means the signaling with MS and GGSN.

See this 3GPP TSG-CN1 Meeting #25 document where it has mention the reason for introducing this IE and usage of that:

6.1.3.7 Protocol configuration options
The MS and the GGSN may communicate parameters by means of the protocol configuration options information element when activating, modifying or deactivating a PDP context. Such parameters can e.g be used to convey inrformation from external protocols between the MS and the GGSN. An overview of how the protocol configuration options information element is used is specified in 3GPP TS 27.060 [36a].
The protocol configuration options information element is transparent to the SGSN.

Answer 2

PCO stands for Protocol Configuration Option. PCO is just used between UE and PGW. Some of the actions are taken at the PGW based on the information (i.e. PCO) that received from UE.

In Attach request, UE may ask for primary and secondary D.N.S sever address. it can also ask for some other information like whom to contact for IMS call i.e. P-CSCF address and so on.
In short, PCO is transparent for rest of nodes except PGW .