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Commonly called use cases. http://en.wikipedia.org/wiki/Use_case

I don't have a particularly favorite ideology or process myself but the important think is THINKING about the software you are going to write BEFORE you write it. To that end use whatever works.

If you need a formal process involving use cases with a specified and standard format great. If writing the README does it for you then more power to you. The important aspect is the thinking.



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