I am actually in the learning phase of .NET related stuff and I was exploring how to save the application. I ended up writing my own class which saves the settings in an XML file and then I found that .NET itself supports saving application settings.
But I found 2 ways to do that. When I open add new item dialog in Visual Studio 2008, it gives option to create Settings file (.settings) or a configuration file (.config). Whats the difference between both and in what scenario they should be used?
Settings (Both from a .settings set and Configuration.AppSettings), are stored in the .config file [alongside lots of other stuff].
The difference is that the .settings stuff [which was added in .NET 2.0 / VS2005] layers a strongly typed class on top of a set of settings that belong together whereas Configuration.AppSettings just lets you retrieve strings, forcing you to do any conversions, and doesnt have the notion of defaults. (the Configuration class has actually been shunted into a side assembly to reflect this - you need to add a reference to System.Configuration explicitly if you want it).
Adding a .settings to your project will result in an app.config being added to house the settings if you dont already have one. The class which reads the settings is automatically generated each time you change the list of settings for your component/application.
Other features of .Settings is the ability to designate some settings as user-specific (and also to save the user-specific settings with a single call).
The best reason of all to use .Settings is generally that you gain the ability to clearly identify who is using which setting in a code base by following usages of properties (and each set is a separate block in the XML file). Configuration.appSettings is more global in it's nature - it's just a bag of properties and you dont know which DLL, subsystem or class depends on a particular setting entry. See this blog post from Steven Smith for much more.
A settings file is a resource file in which you specify the different settings and their default value.
The values themselves are configured in the application configuration file (.config file).
A settings file is never deployed, so you will need the config file to do the configuration.
The app.config file is stored in the same directory as the app. Normal users will not have write permissions (e.g. in "Program Files").
The settings file should be stored in the users "AppData" directory (where he has r/w permissions).
So use the settings file for user configurable options.