If you are a desktop client user, your folders have continued to show up in the same way (with a few additions like a [Gmail] set of folders). But in the background, these folders are actually now message Labels. Folders in desktop clients are now just ways to view messages by a single Label at a time instead of the traditional “file and folder directory” method of storage, making the terms “folder” and “label” somewhat interchangeable.
Labels do all the work folders do and give you an extra bonus: you can add more than one to a message or conversation (threaded group of messages). Instead of filing a message into a single folder, messages are instead tagged with as many Labels as you like. For example, a History professor might create a Label for each class he is teaching, but also one for a topic that that relates to multiple classes such as “the civil war.”
When viewed with a desktop client like Outlook, this means that a message might show up in multiple folders. Any time you create a folder in your desktop client, you are in fact creating a new Label.
Another behavior to watch out for is All Mail. Every message you receive can be found under All Mail as well as other places such as Inbox, Spam, Sent Mail, or any Labels you have applied.