Google Docs has a flexible system of organizing documents. While initially Google Docs used a labeling system similar to the one from Gmail, the current version combines the benefits of labels with the simplicity of folders. The interface names them folders, but they're actually hierarchical labels.
You can add a document to multiple folders without creating copies. Just go to "all items" and drag the document to more than one folder. Since the sidebar doesn't show subfolders, you can't drag the document to a subfolder.
What if you want to remove one of the labels? There's no interface option for this, but you can use this workaround: click on the label you want to remove in the sidebar and drag the document to one of the other labels. To remove all the labels, drag the document to "Items not in folders".

Google's hybrid between folders and labels still needs some improvement: subfolders are not displayed in the sidebar, you can't add multiple labels in a single step and it's not obvious that folders are actually labels.
Labels: Google Docs
said on May 18, 2009 3:24 PM PDT:
Labels is the most stupid development by Google. EVERY other provider has folders. Zoho tried the label stuff too... but as we can see they have folders as well.
imma said on May 18, 2009 4:35 PM PDT:
I think folders are the stupid option - they have limited flexability & waste space with multiple copies of files that are harder to manage.
heirachical labels, if done well(they aren't), would be perfect for both file & email organisation.
Folders are generally supported by a 'but we know how these work' argument (or the above 'but everyone does it this way') which nicely avoids the possibility of making a better system.
/rant
sorry for being harsh, but I feel it is fair here
- imma
imma said on May 18, 2009 4:34 PM PDT:
Don said on May 18, 2009 5:34 PM PDT:
"What if you want to remove one of the labels? There's no interface option for this"
Actually there is - just go inside the folder you wish to move your document out of, select move to from the menu and then select remove from current folder.
Hunnter said on May 18, 2009 5:37 PM PDT:
Folders are a terrible thing.
Down with folders!
Nothing ever comes under one folder, nothing.
Labels are a much more efficient way of describing the linked contents.
I use this on my computer as well, i don't use folders to store a single file.
I just save things in a "hive" folder (groupings of 1000 files in sub-folders), then symlink everything across several descriptive folders.
Such as People and Friends and Brown Hair.
Still need to finish my file manager to make browsing it even easier. (Explorer sucks for browsing in general)
This is basically a global version of what Picasa tries to do for images (and video), but without the overhead and extra space usage for the database.
Aladek said on May 18, 2009 6:20 PM PDT:
Now if they could just let us share anything with a label instead of just the individual docs
Royi said on May 18, 2009 10:46 PM PDT:
I would take Gmail's Labels system over this any day any time.
Especially if they add Sub Labels.
What about adding Latex support ZOHO style to Docs?
Labels are better than category. I use Gmail mainly for that.
said on May 19, 2009 1:09 AM PDT:
I just want interoperability between all these webs apps. We should be able to open a text document hosted on Google Doc with Zoho or whatever else word processing application we want, web-based or not, and without the hassle of exporting/importing.
I want Zoho (and open office) to directly open my http://docs.google.com/Doc?docid=xxx links.
Then the way each service organize the documents hosted on it/opened with it would become a trivial matter, as anyone would be able to use it's favorite service to host them.
ahab said on May 19, 2009 5:32 AM PDT:
@Alex,
What your instructions are missing is that you should ditch the use of nested folders if you want to use the folders as the labels they actually are.
Otherwise you may find yourself one day using identical looking labels that only have there name in common, but not their position in the folder hierarchy.
said on May 21, 2009 2:10 AM PDT:
I vote for Labels. I do not see the need for hierarchical folders when you can just use the doc search. Furthermore, a keyboard short cut to go to a certain label works awesomely in gmail. We should import that function to google docs.
Dale said on May 27, 2009 8:45 AM PDT:
Labels are great - but the best part about labels is the easy searching through my gmail with labels - I can't do that with googles doc folders - what are they thinking? They already have the technology...
Great blog BTW...
John said on May 29, 2009 2:35 AM PDT:
I am a very basic computer user (emails and surfing only virtually). I can move my INBOX messages to my folders simply by clicking on the message and then on the 'Move to' box when my list of folders comes up for selection. This is not possible when I want to move my SENT messages because the box is marked 'MOVE TO INBOX'. Even if I do this, not only does the message not appear in my inbox, but it does not disappear from the sents list! Hope this makes sense. It's extremely irritating not being able to organise my activity in an orderly and businesslike manner.
imma said on May 29, 2009 2:47 AM PDT:
@John
The 'sent messages' is not a folder so much as a search/list of the messages that you have sent, so moving things out of it isn't possible that I know of - it would be like saying 'i didn't send that' ;-)
I'm afraid i can't really help with the items not then showing up in your inbox, it seems to move mine there when i try :-(
GMail (via the web interface) tends to make more sense if you think of things as searches rather than folders, I think things get more complicated if you're using POP or IMAP but i don't so have little knowledge in those.
said on May 29, 2009 12:57 PM PDT:
Folders are needed in Gmail. I work on multiple projects that have multiple major parts. The projects recur each year. So, I have a ProjectX2008 folder with 10 sub-parts to it. I have a ProjectX2008 with 12 sub-parts to it. I now have ProjectX2009 and ProjectY2009, each with parts. So, my current solution is to have folders such as ProjectX2009, ProjectY2009, Part1, Part2.... I assign each e-mail to a Project and a Part label. This is rough, mostly because I now have a completely unmanageable number of labels, including those for personal business, etc. I also must perform 3 operations to label and archive each e-mail. Sheesh. Subfolders would solve this all for me. Labels are a nightmare and slow. I can't imagine how unmanageable my label list will be 2 years from now. "Do I have a label for that or not?"
John said on May 31, 2009 7:18 AM PDT:
Thank you Imma. I appreciate that Sent Messages is not a label. I still don't know why Google allows selected Sent messages to be Sent To Inbox only (and not to a selected label as with Inbox messages) - this worked very simply when I was with Lycos. I don't know what POP and IMAP are, I'm afraid.
labels are the better option of organizing documents.
said on June 15, 2009 10:26 AM PDT:
For Firefox users, there should be a workaround to use hierarchical labels. You just install Better Gmail 2 and do some configuring. https://addons.mozilla.org/en-US/firefox/addon/6076
In reviews section there are some rumors, that the add-on has not been updated for some time and hidden labels feature is unavailable at this time. Have not had time to check this add-on out myself, but if it is so, then maybe there will be some update to fix this issue.
Mystech said on July 3, 2009 9:11 AM PDT:
Google Docs Rock. Microsoft must be worrying :P as google is ready to play game which MS Playing from LONG.
said on July 23, 2009 1:06 PM PDT:
"Items not in folders" disappeared yesterday this is not good
said on August 16, 2009 3:09 AM PDT:
I think having both folders and labels would be a great idea.
This way i could keep all mails from and to a company for example in a folder, but tag them for individual projects they are working on, where this would win out is that several companies can work on the same project and therefore a filter on Tag would bring all the items for the project together, regardless of the folder i keep them in for my convenience.
Chinarut said on September 24, 2009 9:08 PM PDT:
The "Items not in folders" disappeared on my folders list for some reason...
@Don: thanks for the workaround in regards to going into the folder itself and using "remove from this folder" - works great!