Files and folders can be organised any way you see fit, with the exception of operating system files. When installing programs (including the operating system), you will often be offered the choice of where to place the files (selecting both a drive and a folder name), however you cannot organise the files within those folders unless the installer permits this option. Once installed, you generally cannot re-organise program files and folders unless the program itself permits the option (if not, re-installation is the only option).
User-documents (images, videos, music, Word-processing files, etc) can be placed in any folder of your choosing, and can be further organised within sub-folders (folders within folders). The files and folders are not unlike a filing cabinet which can be organised in an infinite number of ways.
Most users begin by saving everything in their <username> Documents folder, however the more files you place in a folder, the longer it will take to open and display that folder. Therefore it's best to split the Documents folder into smaller sub-folders of your choosing. Some operating systems may provide other folders specifically for images, video, music, etc, either within the Documents folder or as completely separate folders.
Grouping similar documents together allows you to apply customised views to that folder, specific to the type of files they contain. For instance, image folders can present thumbnails (miniature snapshots) of the images themselves instead of using generic icons, which makes it easier to locate specific images without having to open each one up.
In the modern operating system, search and find utilities are fairly intelligent so, even if you forget where you placed a file, so long as you know the title (even if only partially), or some text from of its content, or a range of dates when the file was last modified, or even the approximate size of the file, the operating system will find it. If the files are indexed (by the operating system), search and find will be extremely rapid, otherwise a brute search will be conducted which takes much longer.
To set up an index, you will need some free hard-drive space to store the index. You must set up the indexing feature to determine which folders will be indexed. You can also index entire partitions, however its best to limit the index to specific folders, thus reducing the index size and the amount of background processing required to maintain the index.
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