It is an NFS filehandle with a reserved value and special semantics that allow an initial filehandle to be obtained. A WebNFS client can use the public filehandle as an initial filehandle rather than using the MOUNT protocol.It is an all-zero file handle: more precisely 32 bytes of zero in NFS v2 and a handle with a length of zero in NFS v3.
Incidentally, we should note that the last line of this page should read increases with version 3 to a maximum of 64 bytes -- NFS v3 file handles have a length field.
In practice, at step 2 the server tries to check (using the locking mechanism) whether fred is in use on the client, and, if so, renames it as .nfs9999 in order to keep the contents around, and preserve the i-node.