This folder is only needed if WASTE_TRANSLUCENT_DRAGS is set to 1 and you’re still using version 2.1.x of the Universal Headers (the header set that comes with Metrowerks CodeWarrior Pro 1 and older).
If you’re using Universal Headers version 3.0 or newer, and the new shared library stubs that come with this header set, you can safely trash this folder.
The DragLib library stub included in this folder is a version of the original DragLib library which defines two extra entry points: SetDragImage and GetDragHiliteColor. These calls were introduced in System 7.5.3.