nope Gmail doesnt use folders. Think of a label as a
folder. When you are sorting through your inbox, apply a label to
the message/messages and then make sure you archive that message.
At first you might think its weird, but trust me, the label system is
MUCH better way than using folders. And you can also apply
multiple labels to the same message, where you cant do that with
folders, you can only put it into one folder.
For example, I have about 15-20 labels, which are stuff like, Personal,
Forwards, Bills & Finances, Work Related, Job Searches, Online
Purchases, and Gmail-Users, etc. It really works out great, and
when you archive the messages they leave your inbox so its not all
cluttered up. Hope this helps.
Remember the key is to make so good, pertinent labels, and dont forget to ARCHIVE messages after you label them!