How the user uses and relates to the Linux file system. A file system is an organization of storage space designed to contain files in directories. A user can transparently navigate among all these devices. There is a standard layout. The X Windows Distribution, libraries, binaries, and configuration files.
Permissions are a way of controlling who can access a file, and how it can be accessed.
Directories also have permissions. For the most part they are the same as file permissions, as the directory is itself actually a file. Everything is a file. As stated above, directories are files. But so is your physical hard drive, your serial and parallel ports, and even the bit bucket.