When a new folder is added to a project, a physical folder will be created on the file system. New folders are added using the Solution Explorer tool window. A folder can be created under the Project Node or under another File Folder Node. Select the corresponding node in the Solution Explorer tool window. Then select Project -> New Folder from the main menu. The new folder will be created with a default name, and the corresponding File Folder Node can be renamed to the desired value.
Note: You cannot add a new folder under a hidden folder.