package.psd1file will be created in the current workspace's root. So for example, if you have the folder
C:\src\scriptsopen in Visual Studio Code, the file
C:\src\scripts\package.psd1will be created.
package.psd1file is generated at the root of the current workspace folder. Here's an example of a file structure with a root
package.psd1file. Clicking Package Script as Exe on an script will use this
package.psd1file in a particular folder. When packaging scripts in that folder, the scoped
package.psd1file will be used.
test\package.psd1will be used to package the script. When packaging the
test\package.psd1file will be used. The root
package.psd1will used when packaging
test3\test3.ps1because that folder does not have a scoped package config file.