The folder list on the left is the hub for Picasa organization. By scrolling through this list, you can access all photos displayed by Picasa. To understand Picasa organization, you need to understand the following three collections:
Folders in Picasa represent the folders on your computer. You control the folders that are scanned and displayed by Picasa. Changes you make to folders in Picasa affect the corresponding folders on your computer's hard drive. For example, if you delete a photo in a Picasa folder, that photo is also deleted from the computer.
Unlike folders, albums exist only in Picasa. Albums allow you to create virtual groups of photos taken from multiple folders on your computer. Albums display those photos without actually moving the photo -- it's like a playlist for photos. When you delete or move photos from an album, the original files remain in their original folders on your computer.
In this collection, you can organize your photos by what frequently matters most -- the people in them. Picasa uses facial recognition technology to find and group similar faces together across your entire collection of photos. By adding name tags to these groups of faces, new people albums are created. These people albums are just like the albums above: when you move or delete faces, the original files stay put.