Folders serve as logical containers for .mp3 and .wav files; you can use them as a means to organize your files by categories and for automatic playback of a number of audio files in either sequential or random order (Play All Items and Play shuffled menu functions, respectively).
Standard .m3u playlist files, as commonly used by other programs, can be imported to the file library via the Add to library... context menu function or the Add... button found at the top of the window. They can also be dragged from an Explorer window and dropped onto the Audio Library window. This creates a folder with the same name and files as contained in the .m3u file. Folders can also be exported to a .m3u playlist file for use with other programs by selecting the Save as Playlist function from the context menu.
Alternatively, folders can be exported to a simple HTML template file by selecting the Save as HTML context menu function, which you can use for example with a properly configured web browser. You can change a folder's name either by selecting the Rename folder menu entry or by hitting the RETURN key whith a folder currently selected.
Same as with files, folders can be permanently removed from the library either by hitting the DELETE key or selecting Delete from Library from the context menu.
Dragging a folder onto another one in the library will merge all files from both folders into one. Selecting the Sort Items By Name function for a folder will bring the contained files into alphabetical order.