Android is built upon Linux. The way files and folders are organized in Linux/android is different from that in Windows. (I'd say it is better in Linux)
To begin with there is root. Represented by "/"
Root folder is the root of everything, the basic, the foundation, the sum total of all folders.
Rooted on the root folder is a tree of folders.
These are represented like "/system" or "/bin"
That means, the system folder is inside the root folder, so is the bin folder and so on.
When running Linux my home folder is in "/home/akshay"
My desktop files are in "/home/akshay/Desktop"
If I insert a pen drive, it gets "mounted" on to some "branch" of the "tree" eg: "/media/akshay/Transcend"
In android phone you don't get to insert pen drives. But you have sdcard! These can get mounted similarly to some branch. In my phone, sdcard's mounted at "/mnt/sdcard".
So, the external memory seamlessly merges with your internal memory. (Everything is in "/". But things inside "/mnt/sdcard" are actually stored in SD card. Things inside "/mnt/sd-ext" are stored in external storage...)
Thus, every folder on your device is under a single hierarchical order (unlike in windows where you have C:, D:, C:/Users/akshay, I:/lost/count)
PS: If you want to actually see the root folder, and its hierarchy, you'll need a good file manager on your phone. I recommend "ES File Explorer" for all its added functionalities.