ckole - It seems enTourage intends "tags" to be used instead of folders for organizing files.
While you can allocate files into subdirectories via the PC USB interface, the eDGe will ignore these once you add them to the "Library" (which you need to do to annotate them, for example).
"Tags" are in some way superior because you can multiply classify documents, sort of like putting them into different folders at once, e.g. (citing examples from my own Library) both "To Read" and "Sci-Fi" for one book, and "To Read" and "Manual" for another book. You can then remove the tag, "To Read", once you've read the book, for example, without having to delete or move the file around in the file system itself.