This week's book giveaway is in the OO, Patterns, UML and Refactoring forum. We're giving away four copies of Refactoring for Software Design Smells: Managing Technical Debt and have Girish Suryanarayana, Ganesh Samarthyam & Tushar Sharma on-line! See this thread for details.
Beside the fact that you posted in the wrong forum: your hibernate.cfg.xml must be in the classpath. E.g. put it into the WEB_INF/classes folder. Or search this forum for other possibilities (this question was raised several times here already).
Well, I think what the poster might be getting at is that the hibernate-config.xml file isn't any good in the source folder at runtime. At runtime, the files are pulled from the classes direcotory, or wherever compiled code is placed. Often, Java code gets compiled and put into a build/bin/classes directory, but xml files don't always make the move. Sometimes a manual move out of the source directory and into the bin\classes\compile\build directory allows the runtime environment to pick up the resource.
For the most part, the source code directory isn't on the runtime classpath.