I downloaded a free book app from the Android Market and it installed just fine, but when I went to open it it told me I needed to try to delete the
/sdcard/.xiaoniubook/ directory and restart my phone. Where (or what) is that and how can I delete it?
First install this awesome file manager program called ES File Explorer. link
In there browse to /sdcard.
Now press Menu and Select Settings. Go to File Settings and check Show Hidden Files
Now you should see the folder hidden folder .xiaoniubook. Long press it and choose Delete from the menu.
And just for your information, in Linux any file/folder starting with . are considered as hidden file/folder.