web.config is an XML file. A folder can have only one 
web.config file. It helps to set configuration setting for 
an application.

Usually ASP.NET Application will run by two configuration 
files 1)machine.webconfig
      2)Web.config
These two are in system will is for all Webapplications
and we had a choice like maintaining web.config files in 
Application for maintaing connectionstrings,Appsettings 
which is used for Application settings so this web.config 
file will overwrite settings in above two config files and 
we had a choice like maintaining web.config file under 
perticular folder which contain settings for that 
particular pages which are under that folder, so this 
web.config file will ovwrwrite settings in our Application 
web.config file