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A digital folder has the same purpose as a physical folder – to store documents. Computer folders can also store other types of files, such as applications, archives, scripts, and libraries. Folders can even store other folders, which may contain additional files and folders.

Folders are designed for organizing files. For example, you might store your digital photos in a "Pictures" folder, your audio files in a "Music" folder, and your word processing documents in a "Documents" folder. In Windows, software programs are installed by default in the "Program Files" folder, while in OS X they are stored in the "Applications" folder.

Folders are also called directories because of the way they organize data within the file system of a storage device. All folders are subfolders, or subdirectories of the root directory. For example, in Windows, C:\ is the root directory of the startup disk. The Internet Explorer application is installed in the C:\Program Files\Internet Explorer directory, which is also the directory path of the Internet Explorer folder.

While folders may contain several gigabytes of data, folders themselves do not take up any disk space. This is because folders are simply pointers that define the location of files within the file system. You can view how much data is stored in a folder by right-clicking it and selecting Properties in Windows or Get Info in OS X. To create a new folder, right-click on the desktop or an open window and select New → Folder (Windows) or New Folder (OS X).

Updated: June 12, 2015

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