Hello and welcome to the forums.
There will be two primary locations for working with your database: system.ResourceDirectory which is read-only * and system.DocumentsDirectory which is writable. Your installable app will have to copy the database from system.ResourceDirectory to system.DocumentsDirectory on first start, or you have your base database creation/initialization code as part of your Lua code and you create the database in system.DocumentsDirectory from scratch. I don’t believe the extension matters as you will provide the entire filename to Corona SDK’s API calls.
Now while you’re working in the simulator, we simulate the two main directories. system.ResourceDirectory is where your main.lua is and while it’s “read only”, the simulator may actually allow you to update it. This can be helpful while testing but it can also be a bad practice because you should plan from the beginning to only be able to write to system.DocumentsDirectory. That folder is behind a really ugly path on your computer, but the simulator has an option to “Show Project Sandbox” which will take you to the folder where your files are stored. Once you know that path, you can use the locally installed copy of sqlite to open the database from the command line and manipulate it or use any app that can manipulate the database. I don’t know if you’re on a Mac or Windows so I’m being a little generic.
We have a tutorial that can help you learn to copy your binary initial database from system.ResourceDirectory to system.DocumentsDirectory. See: https://coronalabs.com/blog/2015/05/19/tutorial-initializing-a-writable-sqlite-database-from-a-read-only-database/
We also have a more generic how to use SQLite in Corona tutorial here:
https://coronalabs.com/blog/2012/04/03/tutorial-database-access-in-corona/
Rob