Files and folders are important resources in Windows XP that store documents, pictures, music and programs. When installed, Windows XP creates four system folders - Documents and Settings, Program Files, Temp, and within Documents and Settings it creates My Documents, My Pictures and My Music. To create a new folder, open My Computer, select a drive or folder, click New then Folder and name the new folder. To copy or move a file or folder, select it, click Copy or Cut from the Edit menu, open the destination folder and paste.