Read the Documentation:
Web.config and App.config
The choice of the
configuration file name is determined by the hosting environment you
choose for the service. If you are using IIS to host your service, use
a Web.config file. If you are using any other hosting environment, use
an App.config file.In Visual Studio, the file named App.config is used to create the
final configuration file. The final name actually used for the
configuration depends on the assembly name. For example, an assembly
named “Cohowinery.exe” has a final configuration file name of
“Cohowinery.exe.config”. However, you only need to modify the
App.config file. Changes made to that file are automatically made to
the final application configuration file at compile time.In using an App.config, file the configuration system merges the
App.config file with content of the Machine.config file when the
application starts and the configuration is applied. This mechanism
allows machine-wide settings to be defined in the Machine.config file.
The App.config file can be used to override the settings of the
Machine.config file; you can also lock in the settings in
Machine.config file so that they get used. In the Web.config case, the
configuration system merges the Web.config files in all directories
leading up to the application directory into the configuration that
gets applied.