Eclipse and the File System
The interraction of Eclipse with the file system is reminiscent of the old Visal Age for Java development environment where files had to be imported and exported to and from the file system into a code database. Things are a bit more relaxed in Eclipse but some level of isolation remains. The most important thing to remember is that changes to the file system aren't reflected inside the Eclipse workbench until a refresh is performed - that is assuming the modified file isn't already opened and being edited. The remaining part of this article contains additional thoughts and observations on the topic.
If a new project is created in an existing directory any files that existed will appear automatically in the project. Reversely if a project is deleted existing files and folders will be left intact.
Personally I take advantage of this quite often as follows: I create a new project from existing files and folders and then use Eclipse to manipulate the files. When I'm done I delete the project without affecting the files that were in it. I do it because Eclipse has many views, shortcuts, and editors I like to take advantage of when working with files.
As you create new folders you give them a name and they appear in your project tree. Eclipse also allows you to create a special kind of top-level folder called a Linked Resource. A Linked Resource is a logical folder in Eclipse that points to a different physical location. Linked Resoures can be configured for the entire worksace from Window > Preferences > General > Workspace > Linked Resources.
In theory a Linked Resource can be used just like any other folder and for the most part they can't be distinguished. However some limitations do exist. For example the CVS team feature doesn't extend to Linked Resources. If you plan to use that feature you will need to avoid them. A good example of using Linked Resources is setting up multiple projects with a common output directory such that all classes are compiled to a single location. You may also use it to include folders with 3rd party jars located somewhere outside of any individual workspace.