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Chapter 3.1 of No_Frills_Magento_Layout book explains about the folder where layouts are stored and how does Magento gets the name of Layout files. It tells that Magento gets this name from config.xml of your module and then load these layout files to form Package layout . In my setup, Magento is loading all the Layout files "in base/default/layout" folder. It doesn't consider layout files mentioned under element of Config.xml.

Can someone explain this mystery? What is the purpose of element in Config.xml if layouts are not loaded based on this element?

SHARMA
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I am not an expert but I think you are confused with these layouts.By default magento is rendering the default layouts in "base/default/layout".The config.xml file in the "app/code/core/module_name" refers to those layout files. If your are creating your own module than in your config.xml you have to define the layouts of your module which lies in "design/frontend/default/your_theme/layouts".These layouts will define which part to modify or we can say this will structure your modules frontend display. And another thing the layouts are loaded based on the elements of config.xml. For eg: if you define the layout in element than this refers that the layout is assigned for the front view of your module. For further information about elements in config.xml, refer to http://www.magentocommerce.com/wiki/5_-_modules_and_development/reference/module_config.xml

Hope this will help!

Navin Bista
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