7250 - Propel: What are the differences between the files under ".lib" and "lib" folders?
The .lib file is used as a temporary cache for any changes made on the IP files inside the lib file.
As an example, consider this Soc project named CPNX_Helloworld_Proj. When the project is closed, user can only see the lib file.

When the project is opened in Propel, you can see the .lib file gets created.