As we know that: The Configuration system first searches settings in (machine.config) file & then looks in application configuration files (web.config)
So, the difference between both of them is: “Web.config” files apply settings to each web application, while “Machine.config” file apply settings to all ASP.NET applications.
Setting stored in Machine.config file are:
1. Connection strings
2. Membership
3. RoleManager
4. Profile
5. HttpHandlers
Setting stored in web.config file are:
1. Database connections
2. Session States
3. Error Handling
4. Security