For this step-by-step tutorial, we'll build a sample folder structure for our photos. To begin, go to your Start button, then Computer, then find your C: drive. For most people, this is their computer's primary hard drive, and the place you'll create the folders. Double-click the C: to open the drive. At the top of the window, you'll see the word "New folder". Left-click to make the new folder. (Note: these screenshots are from Windows 7. I will note the differences with Windows XP where applicable.) For both OSes, a shortcut is to right-click in a blank area of the C: drive, scroll down to "New" in the popup menu, and left-click "Folder" to make a new folder.
In Windows XP, go to Start/My Computer/Local Disk (C:). Then, under "File and Folder Tasks" on the left, click "Make a new folder".