What is the difference between a .xib file and a .storyboard?

Yes, you can still create a Window-based application for iOS 5. If you use the "empty project" template, you will see that a window is created for you in the app delegate. From there you can add XIB files as normal, or a new storyboard.

I'm assuming you mean "storyboards" rather than "timeline". Storyboards allow you to map out, visually, all of the views in your applications and how they interrelate. If you are just starting out with storyboards, there's an introduction to storyboards in the WWDC 2011 videos here. The 2011 Stanford iOS course on iTunes-U is also iOS 5-specific and covers storyboards and more.

Apple introduced the concept of "storyboarding" in iOS5 SDK to simplify and better manage screens in your app. You can still use the .xib way of development.

Pre-storyboard, each UIViewController had an associated .xib with it. Storyboard achieves two things:

1. .storyboard is essentially one single file for all your screens in the app and it shows the flow of the screens. You can add segues/transitions between screens, this way. So, this minimizes the boilerplate code required to manage multiple screens.

2. Minimizes the overall number of files in an app.

You can avoid using Storyboard while creating a new project by leaving the "Use Storyboard" option unchecked.

You could refer this tutorial to get started.