I was looking at the Yocto Development Manual (Latest), section 
4.6.2. Creating Config Fragments.  I was confused about the file 
statement and the naming of the directory to locate the fragment file 
until I found a similar discussion in the BSP Guide (lastest) section 
1.2.10. Linux Kernel Configuration.

The section there is much more understandable.  I think we need to 
modify the development manual or have it point to the BSP manual. The 
text from there (below) I think is better.  I still think it's confusing 
about the naming of the subdirectory where the myconfig goes. Maybe a 
complete example would be good.

    For example, suppose you had a set of configuration options in a
    file called |myconfig|. If you put that file inside a directory
    named |linux-yocto| and then added a |SRC_URI| statement such as the
    following to the append file, those configuration options will be
    picked up and applied when the kernel is built.

          SRC_URI += "file://myconfig"
                     

    As mentioned earlier, you can group related configurations into
    multiple files and name them all in the |SRC_URI| statement as well.
    For example, you could group separate configurations specifically
    for Ethernet and graphics into their own files and add those by
    using a |SRC_URI| statement like the following in your append file:

          SRC_URI += "file://myconfig \
                 file://eth.cfg \
                 file://gfx.cfg"