When the Kindle is connected to your PC via the provided USB cable, it appears on the PC side as a drive. If you have installed a SD Card, that also appears as a second drive.

• To move e-books, music, or pictures to and from the Kindle and PC, you must drag and drop them between the appropriate USB drive’s target folder and the location you keep them on your PC, e.g., My E-books, My Music, etc.
• The Kindle does not initiate any type of automatic synchronization of the material, you must manually keep things synchronized by dragging and dropping and deleting files as appropriate.

Here is the impact of creating folders on the Kindle’s SD card;

• If you create the folder in the root directory of the card, for example, a ‘read books’ folder, that folder and its contents are not visible on the Kindle.
• If you create the folder in the ‘documents’ folder of the card, the folder itself does not appear on the Kindle, however, the contents of the folder and any sub-folders are found and displayed.

Unfortunately, this behavior doesn’t help much in terms of organizing your books on the Kindle. Hopefully, a future firmware upgrade will change that.