Organizing Files
You may need to organize how files are to be stored on the backup
target. For instance, two files in different directories might
have the same name, so they'll need to be on different directories on
the target as well. Or you may just want to keep files that are
in different directories on your disk also separate in the backup
location. The TagNBag Namespace Extension allows you to create directory structures on the virtual directory for the backup, and to move files to the created directories.
Creating directories
You create directories or folders in the TagNBag virtual
directory in a way similar to how it's done in the regular Windows File
System. Just do a Right Mouse Click (RMC) in the directory you
want to set the new directory, and select the New menu item in the pop up menu, followed by the Folder item:

This will create a folder labeled New Folder. You can rename this as you can any item in Windows Explorer.

You can also delete a folder if you decide that you no longer want it.
Moving (or copying files)
Similar to creating folders, you can move or copy files within the
virtual directory using drag and drop. You can also copy files
from the file system to the virtual folder, which will add them to the
backup set. They will be marked in the file system with the
TagNBag icon as if you had done the Mark for backup RMC menu selection.
Directory scenario
To see why the directory organizing faciliity is needed, consider what
happens in a typical file marking scenario. When you decide that
a file in the your file system should be included in a backup, you mark it.

This causes the file to be marked with a TagNBag overlay icon.

It also causes the file to appear in the To back up virtual directory in the TagNBag namespace extension.

But note that other files in other file system folders will also be put in the root of the To back up virtual
directory. This mixing of files from different source directories
can cause obvious confusion. Worse, if two files in different
directories have the same name, such as two readme files, you can't have them in the same directory at all.
For this reason, you might want to create a subdirectory under To back up when
you mark a file to be backed up. After the file is marked in the
view for the file system, you can switch to view the file in To back up.
There you can create a subfolder for the files you just marked.
Once the files are moved, you can go back to your file system and
repeat the process.