Whats included in Library/Mobile Documents folder and is there anyway to safely decrease the size
~/Library/Mobile Documents is the aliased location for iCloud Drive. You can access this from the sidebar or Go &gt; iCloud Drive ⌘⇧-I. If you have a folder in there with the name of your external drive, my guess is that it has been copied by mistake or perhaps a 3rd party backup? I can't think of any built in system that would do that.

For other files, you can see exactly what is taking up space for Mobile Documents in the iCloud System preference. Once in that preference pane click on Manage... bottom right. This will show you all of the programs that are storing data and you can delete them as you see fix. Keep in mind that some programs require a certain amount of data that you can't delete.

If you don't want a program to store data this way, go back to the main iCloud pane and click the Options... button to the right of iCloud Drive There you can check/uncheck the programs that are allowed to save data to iCloud. Also take note of the Optimise Mac Storage checkbox, you'll want this turned off.

Mobile Documents Also stores photos that have been shared to you from other people with iCloud Photo Sharing, you might want to check this option in the iCloud preferences too.