Take the example of the Web page you're reading right now: http://www.uvm.edu/webguide/build/?Page=url.html (The Web Guide has a tilde-less address (no "~" in the URL. Most will have /~accountname. See our documentation on obtaining a friendlier URL).
In the case of the Web Guide, it's a large site and folders/directories are used purely for organization. You may not have any folders inside your own website. For example, in the url http://www.uvm.edu/~anthro/?Page=programs.html (the Anthropology website), the editor would simply enter the public_html folder and find the file called programs.html
This is definitely where your finished website will live — anything files you place in the public_html folder are in fact visible by the public. So some like to actually build the website in a folder, perhaps called "development" that you place in the public_html folder. So, for example, you end up looking at http://www.uvm.edu/~accountname/development in order to view your website. That keeps it out of the public eye while you go through the process of developing. Learn how to publish your website.
If you provide labels and links within your Content Area to other pages on your site, you will need to use a special code for the URL address in order for the page to show up in the UVM Web Template format. Let's say that the name of the file/page to which you want to link is called subpage.html. The link to that page should use a special code, ?Page=. Here's what the link from default.html should look like: ?Page=subpage.html Note that the P is capitalized.
See this page without the ?Page= code. If all of a sudden your website looks stripped of its formatting, add a ?Page= to the link.