.settings files are similar to DevFaqInstanceDataObject .instance files, with the difference that they are XML format, and can contain serialized data rather than just default instances.

Since the introduction of NbPreferences to replace SystemOption, very little new code uses these files, and they should be considered semi-deprecated. They are difficult and error-prone to use, and have a fair amount of overhead. The Window System still requires them to be used to persist the state of opened windows/tabs (caret position, what file is opened, or other state that should be restored when reopening a TopComponent after a restart) across application runs.

A .settings file can encode the entire parent class and interface hierarchy of the object it represents, so that a query about whether an object of a given type is present (such as using Lookups.forPath("path/to/folder").allItems()) can be answered without actually creating an instance of the object.

Settings files are also useful if you are declaring some objects in a layer file (see DevFaqModulesLayerFile) and intend to write them back out to disk after they have been modified in-memory (note this involves writing ugly and inefficient hexadecimal-encoded serialized data into XML files - if the object is a singleton, using NbPreferences will be both more efficient and more readable).