"Folders" are also known as "directories" or "subdirectories if they are placed inside another folder.
They are real handy for organizing files so that things can be found.
I personally use a nested directory/folder system to arrainge my music by File type (mp3 or wav), Genre (Rock, classical, etc),
Artist and then Album
usually I use the file type (mp3, wav) as the root directory to "shorten the tree structure", because frankly what would you expect to find in a directory named "mp3 320k"?