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The directory is (something like) Books/Mobipocket on whatever filesystem you end up on when you press the books key (which takes you to the Books directory).
Usually, when a .prc or .mobi file is opened (e.g. in Books) the iLiad creates a separate directory of the same name and copies the e-book into it with a manefest file (just as it does for PDFs, say). However, the MobiPocket Reader does not understand the iLiad's weird contentlister scheme and so books in the Mobipocket directory are handled differently - i.e. just like they would on any other computer. So when you open an e-book in the MobiPocket directory it stays in that directory (no subdirectory created). This is where Windows MobiPocket Reader would put all your .prc files. If you don't use Windows MobiPocket Reader to manage your e-books you can put them where ever you want, but dictionaries must be in the Mobipocket directory.
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