When you have a lot of different content types attached to the same document library, it can be confusing for users.  Wouldn't it be nice to organize them into separate folders, so that users see only the content types they need to see?  Folder content types allow you to do just that. 

Fellow MVP Mikhail Dikov has written a very interesting piece that explains how to create and use folder content types to organize your document libraries.  Click here to read the full article: http://www.mikhaildikov.com/2008/05/sharepoint-folders-need-more-love.html