why is there a capacitor in the middle of that diode bridge?

It is just drawn in the middle. It's actually at the output, filtering.
It would be better to have 3 capacitors, one from each output to ground, and they would be
polarized electrolytics too no doubt.
Zeners are poor voltage regulators, this isn't a great power supply design, its a starting point
really...
KobiAflalo:
why is there a capacitor in the middle of that diode bridge?
You seem to be getting sorely distracted by the possible uses of Zener diodes.
I would advise you to forget about their use in power supplies for the present and stick to using a suitable regulator attached to a suitable heatsink. Where you need to handle currents in excess of half an amp, consider using a switchmode module such as are now readily and cheaply available.
Guys, I don't think the OP is actually planning to use that circuit. I think he is trying to learn electronics and
found this circuit in a homework assignment or something. I mean really. Look at it. Would anyone actually use that circuit ? There's no fuse on the primary. The voltages are only useful as references. Your not going to drive anything with those zener outputs. It has to be some kind of homework question. There's no part numbers. There isn't even a value or rating for the cap.
To actually answer the question. The capacitor smooths the full wave rectification signal into DC.
Of course the other comments are all very valid.