As suggested by Etsuro Fujita, but with somewhat different wording.
<term><replaceable class="parameter">filename</replaceable></term>
<listitem>
<para>
- The absolute path name of the input or output file. Windows users
- might need to use an <literal>E''</> string and double any backslashes
- used in the path name.
+ The path name of the input or output file. An input filename can be
+ an absolute or relative path, but an output filename must be an absolute
+ path. Windows users might need to use an <literal>E''</> string and
+ double any backslashes used in the path name.
</para>
</listitem>
</varlistentry>