Let me tell you the secret of computers, of operating systems, and of the whole industry that surrounds these things: Everything is data. Information is the be all and end all of everything we do with computers. Files are the storehouses for that information and learning how to manipulate them, use and abuse them, and otherwise play with them will still be the point of computers 20 years from now. There's a saying in the Linux world that "everything is a file" (a comment attributed to Ken Thompson, the developer of UNIX). That includes directories. Directories are just files with lists of files inside them. All these files and directories are organized into a hierarchical file system, starting from the root directory and branching out.
For the record, and to make things easier, you can safely assume that folders and directories are the same thing. The terms can be used interchangeably, but I will usually refer to them directories. If you are more comfortable thinking of them as folders, don't worry. Depending on the application, you'll see both terms used.
The root directory (referred to as slash, or /) is actually aptly named. If you consider your file system as a tree's root system spreading out below the surface, you start to get an idea of just what things look like.
Under the root directory, you'll find folders called usr, bin, etc, tmp, and so on. And then we have the three invisible, often overlooked, but completely indispensible files on your system: standard in, standard out, and standard error. I'll tell you more about those three later. Suffice it to say that understanding and knowing how to work with all these “files” will provide you with amazing flexibility when it comes to doing your work.