LocalPrefs.json contains preferences local to this machine. It does NOT get backed up in any way.
Prefs.json contains preferences that are synced across all of your machines via Steam Cloud.

All prefs files must be valid json.
If you edit them, make sure you don't break the format.

If a pref key is missing from the prefs files, the game will use the default value and save ONLY if overridden.
Additionally, you can NOT move things between Prefs.json and LocalPrefs.json, the game will ignore them if misplaced.