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Project properties is found within the platform directory of hybris and provides factory default settings. It is not recommended to edit this file.
Local properties is the working copy of the project.properties file that will be found in the config folder. Use this file to override the default hybris settings.
They both do the same thing, allow you to define database connections, ports, build environment, mail services, frontend https, etc,etc. You might ask why don't you just modify the project.properties file instead? You don't because of the following:
In general any changes you want to make use local.properties in config. Hope that helps.