ReadMe files should be used to describe your project and your data. When depositing data into repositories, you'll likely include a ReadMe file that just explains the files you've deposited. When you're keeping ReadMe files for your own records, it's good to have a top-folder ReadMe that explains all the subfolders and files that are part of the project as well as having them for lower-level files.
These resources give great overviews of ReadMe files and guidance on how to create them:
Here's some guidance from two popular repositories that recommend and use ReadMe files:
Need a ReadMe for an Internal Team Project?
The Cornell ReadMe template is great if you are documenting your research data for sharing, but it doesn't fit the need for individuals and teams who want to internally document their data. We have created an Internal Team ReadMe that is oriented to document the information that teams need to know for their own projects. We encourage you to add more information as necessary to support comprehensive documentation.