It's just an image. if you do not have a REU image, VICE will create a 'blank' image for you automatically. If you do have a REU image, VICE will 'reuse' that image. It's like having a battery-backed REU. If you are going to use a REU for GEOS usage, I suggest you create a 2Mb REU image.
tHIS may help you....
http://vice-emu.sourceforge.net/vice_7.html