what am I missing - no folders, just .apps

[MichaelK]

I've just started using tag folders. when I create a new tag folder by
clicking on 'new tag', it creates a 'xxx.app' file, which I can't do
anything with.

look: http://drp.ly/rhG8Q

what's going on? why does it create .apps instead of folders?

I can't put anything in them, or nest them inside of each other.