What's the difference between libs and src folders?
The source folder is for ActionScript and Flex source files, mostly with .mxml or .as extensions. Anything you code you put in the src folder, though if you create your own library of reusable code, you might keep it in a second source folder (with another name, of course).
The libs folder is a special folder in Flash Builder, that you can put .swc files in. These SWCs (pronounce 'swicks') contain compiled code already. 3rdparty frameworks (or libraries) are easy to use by downloading their SWCs, and you can also create SWCs with assets from the Flash IDE, for easy access to your asset library. Hence, I guess, the naming of the folder 'libs'. The SWCs in the libs folder are automatically added to the classpath of your project, so you can access the classes therein.
Cheers, EP.
P.S. Worth noting is that in other development IDE's like FDT or FlashDevelop, SWCs in the 'libs' folder are not neccessarily added to the classpath automatically and might need a little manual configuration.
src should contain your source code. lib contains the librairies that you reference and use in your code (.jar files for example).
EDIT : For Flex projects, you put in lib the .swc files that you load from your source code.
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