“Directories” (or “subdirectories”) is the traditional computer-science term for levels of a hierarchical file system. “Folders” is merely the popular term for the graphical representation of directories in certain visual user interfaces. The things the graphical “folders” represent are directories.
In the Dreamhost server file structure, a user account will have its own home directory named after the username. Then, within it, there will be subdirectories for each domain or subdomain hosted within this account. You can have an unlimited number of domains hosted within a user account, and you can set up multiple user accounts within your paid hosting account, so you can have a structure like:
where user1 has access to domain1.org and domain2.net, and user2 has access to the other domains listed (one of which is a subdomain of domain3.info).
It doesn’t matter which of these was the first domain you set up; each domain has a separate directory beneath the user home directory.