Final answer:
When creating a preferences screen for an Android application, the XML files are stored in the res/xml/ directory. These files contain the PreferenceScreen tag and the individual preference items.
Step-by-step explanation:
The directory used to store the XML for a preferences screen in an Android application is the res/xml/ directory. Preferences screens are typically defined through XML files within this directory. These XML files contain the definitions for the various preferences that will be displayed in the preferences screen. To create a new preferences screen, you would create a new XML file in this directory and define the PreferenceScreen tag along with its corresponding preference items inside.