Files have names. Often the name indicates something about what is stored in the file. Files can be copied, stored on hard disks, diskettes, CD-ROMs, tapes and other media. Files can be erased. Folders are collections of files.
Folders have names.
Folders are used to organize files. If all of my 36,476 files were in a single folder I would have no hope of ever finding anything. Consider what would happen if all of your papers were emptied from their folders and piled on your desk. Similarly creating folders and putting files into folders is an important task in managing a non-trivial collection of material on a computer. On computers, we typically put folders into folders and create hierarchical arrangements.