Silver bars are created from native silver and Horn silver. There is also a 50% chance of getting silver bars from Galena, and a 20% chance from Tetrahedrite. Silver bars are used to create valuable goods and as a component for making electrum.
Silver bars can also be used to mint coins at a metalsmith's forge. Minted silver coins can be used in the economy system, as well as for trading. However, trading them with caravans is not a good idea as they have the same base value as furniture and no quality levels, making them a poor value trade good.
Weapons can also be made from silver (with the notable exception of crossbows), but all other metals that can be used for weapons deal more damage. The damage dealt by a silver weapon is the same as wooden ones: 50%. While this makes them a poor choice for outfitting your armies, it does make them a safe choice for sparring. Silver weapons have one benefit over wood: While you have to
put up trade with filthy treehugging sandal-hippies elves to acquire wooden weapons, you can make silver ones yourself. Also, the hippies elves won't sell you proper weapons like hammers and axes, but only what amounts to wooden poles.