In SQL Server Management Studio I would like to know what is SQLCMD mode?
Exactly what it sounds like.
It is a mode that lets you author SQLCMD scripts.
From MSDN - Editing SQLCMD Scripts with Query Editor:
To use the Database Engine Query Editor to write or edit SQLCMD scripts, you must enable the SQLCMD scripting mode.
In SQL Server Management Studio, set this via the Query menu (Query -> SQLCMD Mode).