how many web.config files can be allowed to use in an application

You may have multiple Web.Config files in one Asp.Net Application, but only single per folder.
look at this url
http://weblogs.asp.net/jalpeshpvadgama/archive/2011/03/23/working-with-more-then-one-web-config-files-in-asp-net-application.aspx

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Types of Config files

Web.config file is configuration file for a Web application and stores various settings for an application. An application can have a single Web.config file only.

App.config file a configuration file for a Windows application and purpose is same as Web.config has for a Web application.

Machine.config file has settings that applies to the entire machine (means all applications running on a machine).

Similar to the above answer

Maximum web.config files must not exceed numbers of subfolder + 1(i.e root folder)

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