Just like real world folders, folders on your hard drive store files. These files can be documents, programs, scripts, libraries, and any other kind of computer file you can think of. Folders can also store other folders, which may store more files or other folders, and so on.
Folders allow people to organize their files in a way that makes sense to them. For example, a college student might store all her photos in a folder named "Pictures," all her papers in a folder named "School Work," and all her financial information (including the tens of thousands of dollars in student loans) in a folder named "Finances." All these folders might reside within a folder called "My Documents."
The computer's operating system also uses folders to store data such as system files, library files, and user preferences. Often, the folders that the system uses are locked, meaning users cannot alter their contents.
While folders can store several gigabytes of data, folders themselves hardly take up any space on the hard drive. This is because the folders are really just pointers to files and other folders, telling the computer where they are located. The compilation of folders on your hard drive make up the "directory structure," or overall organization of your hard drive. For this reason, folders are also referred to as "directories." Thank goodness for folders, because without them our hard drives would be pretty cluttered!