We people have seen that contributed modules have config folder.
Name (config) itself say its for some kind of configuration,
Yes, Config folder would contain configuration for that module.
Most config folder will contain install folder where in we can set our module settings by creating settings file there. modulename.settings.yml.
Let me explore it with an example,
You may have scenario to create module where in it will trigger email to email id on one particular page is hit
You can set your email and page url in modulename.settings.yml file
You can add another modulename.schema.yml file in config/schema folder
this file will validate whether values given in modulename.settings.yml is string or integer
email: 1 // you may give like this
page:1 // you may give like this
it will through error, if you given it wrongly