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That is really strange--on an older house, it would be a 'wind brace' which stabilizes the structure (usually balloon framed). I thought modern houses did away with that?

It's a diagonal brace to prevent racking of the wall. Very commonly used if the wall sheathing was boards installed horizontally. Plywood or other sheet-type sheathing made the braces unnecessary.

" I thought modern houses did away with that?"

Far from it.

There are now metal braces that can be let into a saw kerf.

Plywood sheathing with the correct nailing schedule limits the need for separate braces, but something is still doing the job.

Okay, thanks guys. I did some googling on wall racking and sheathing so I understand what it is doing.

I was wanting to install a window in this area of the wall and the brace would need to be cut to accommodate the window opening. Can I have someone change the type of bracing so that I can put the window in?

If you put sheathing on the studs they replace the diagonal brace.

And those braces can be moved, or several smaller ones can be used if the big one needs to be removed.

The building code spells the requirement out in great detail. Since it is a 1 story house it doesn't need much lateral resistance. I believe the code will allow you to have plywood panels 2 ft wide at each corner if you nail them properly. The corners are more important for resistance than the middle of the wall.

Building codes require diagonal braces or structural panel sheathing to be at the corners of the house because that is where the strongest forces are created in a wind storm.

If you want the window to be very near the corner there is a code alternate panel design that is as small as 16" (I think) but it requires plywood on both sides of the wall with additional nailing and bolting the sill plate to the floor structure or you can use a Simpson prefabricated braced panel.

This is not a casual design issue, you must follow the code details exactly or have an engineer stamp the design.