DWP vs .WEBPART
“During the time of adding a new webpart, iam seeing .dwp for some webparts and .webpart for some webparts as extension.
What is the difference between these two?”
The differance here is that one is a SharePoint webpart and the other is a .NET web part. The .dwp is a SharePoint web part. This would be one like the Content Editor. The .webpart is a .NET framework.
The primary differances are that the SharePoint webparts are built with backwards compatibility and more functionality in the web parts communitcation area. If you needed a web part that worked in WSS 2.0 and WSS 3.0, this would be your guy. The later is one that most likely originated in Visual Studio.