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It's basically correspondence sent to a school after you submit your primary application in hopes of being granted an interview. Often times, it's sent by regular mail so that the admissions staff has to pull your app to add the letter to the file.
There's also what's called a "Letter of Intent," which is similar to a Letter of Interest, but it informs the school that if accepted you will matriculate there. They're often sent post-waitlist.
It's difficult to gauge whether Letters of Interest actually help or not. It's conceivable that students who sent letters and were then offered interviews would have received them even if they didn't send a letter. Bottom line, I wouldn't send a Letter of Interest unless you have updates (new research project, volunteering, new transcript), or it just seems like begging. It's best to show a school you're still interested by telling them what you've been doing to make yourself a better applicant.
I think that you can write a letter of interest professionally without sounding like you are begging. I had had my application in since July the year I applied, and hadn't heard anything by October. I sent a letter of interest to PCOM first stating that when I had answered "WHY PCOM?" in the application, I had left out why I would be a good fit for PCOM, instead of the other way around. I did talk briefly about what I had been involved in since applying, and also further expressed my love for Philadelphia, the community, and my desire to practice in the area (which I had not discussed in much detail in my application either and i was OOS). I sent the letter Fed Ex and got a confirmation of when the office had received it. I received an interview invite the next day, literally. It could definitely be a coincidence, but given the time frame, I don't think so.