Further note that Apache must look for .htaccess files in all higher-level directories, in order to have a full complement of directives that it must apply. (See section on how directives are applied.) Thus, if a file is requested out of a directory /www/htdocs/example, Apache must look for the following files:

/.htaccess
/www/.htaccess
/www/htdocs/.htaccess
/www/htdocs/example/.htaccess