A folder is a region that can contain other regions, similar to a folder in the Finder that can contain different files. You can edit a folder in many of the same ways you edit a MIDI region.
A folder can be thought of as an arrangement within an arrangement. A folder can contain as many tracks (with their regions) as needed. When a folder is closed, it looks like a MIDI region in the Tracks area:
When open, a folder looks just like the Tracks area for a project:
The track containing the folder doesn’t have a channel strip. Its track header shows a folder icon in place of an instrument icon.
If you drag a folder to a software instrument track, all MIDI regions in the folder are played by that instrument. This can be useful if the folder contains tracks for a given instrument or instrument type, such as a drum kit, string sound, or brass section, for example. This provides a quick way of listening to a string arrangement if some of the intended sound sources are unavailable.
Similarly, an entire project could itself be a folder, appearing as a gray beam in the Tracks area. In this way, you could arrange several projects for a concert. Another possible use might be to store different arrangements of a project in different folders, allowing you to switch between them rapidly.
You can also use folders to represent song sections such as verses and choruses, for example. You can nest folders within other folders, with no limit to the number of levels you can create.