If the zip is named similarly to DLC_xlive_removal.zip , it is used to unlock DLC like Understone or Traitor's Keep .
Open the zip and move xlive.dll and xlive.ini into your main Fable 3 install directory (usually found in Steam\steamapps\common\Fable 3 ).
Inside that new DLC folder, create three folders named exactly: 01_Understone 02_TraitorsKeep 03_InquisitorsPack .