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It is elemental fire damage used for damage calculation only. Some enemies are resistant , some are vulnerable.
Game is still in development , I have no idea if there are any plans for this to change.
yeah thats really confusing and none of us playing have no idea how to use weapons with those weird abilities on it.
As @Ryzilynt said that damage will be affected by how resistant your target is to that element; ie is it applied at its total strength, some fraction of that total, or not at all.
It is the same with weapons that might do two types of base damage, like blunt and piercing. a portion of the base damage is applied as blunt and a portion is applied as piercing. Depending on the target's resistances you may get full damage per swing or something less.
This also comes into play with skill tree perks. Say you perk for increased blunt damage and you have the above weapon. Only a portion of the damage, the blunt portion, will be 'upgraded' so a pure blunt damage weapon will see a larger increase with the perk than a weapon with only a portion of its damage being blunt.
As an aside 'blue' perks only apply to staves and wands so there is no reason to pick a +fire damage perk for your sword.
It is the same with +blunt or +piercing damage on upgrades; the extra damage may fully, partially or not at all apply based on the targets resistances.
Ultimately it means as a melee fighter you can choose the right weapon (if you want the added elemental damage) based on the mobs you are fighting. There is a bit more to consider than many people believe and it really comes into play on the highest difficulties.