When viewing an album, the default behavior of FotoAlbum is to show all pictures for whatever album or group is currently selected.
For example, if you clicked on Vacations in the following screenshot, you would see all pictures in the Vacations album (including the pictures in the Honeymoon group and the Trips to Europe group, etc.).
Changing the default for displaying pictures in albums
You can change the way FotoAlbum displays pictures in albums to only display pictures in the currently selected group. There is a global preference that changes the way pictures are displayed. If you change this, then in the previous example, if you clicked on Vacations, you would only see pictures that are NOT located in any group within it. Likewise, if you clicked on "Trip to Europe", then you would not see the pictures in the "London Trip" group.
While the non-recursive approach is similar to the Windows Explorer, most users appear to like the default (recursive) approach for picture management.