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Valid for Sitecore 5.2
I need to localize a custom application. How is localization done in Sitecore?

Q:

I need to localize a custom application. How is localization done in Sitecore? Where is the Localization folder located?

A:

Use the Sitecore.Globalization.Translate.Text("_key_text_") method for the purpose.

This method searches for a given key-text in the System/Dictionary/* folder of the core database. If the key is found, the text in the appropriate language is returned.   

 
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The key field is the same for all languages.

Use the Phrase field to specify the translated text.