Google has added Nested Labels to GMail Labs. Labels tend to be more flexible than folders. E-mails can be in multiple labels, but not multiple folders. Below is an excerpt from the GMail blog about the new feature.
If you think this might be useful to you, go to the Gmail Labs tab under Settings, look for “Nested Labels,” enable it and click “Save.” You’ll then need to name your label with slashes (/) to make it the child of another. For example, let’s say you wanted to create a simple hierarchy with a “Home” label, and inside it a “Family” and a “Vacation” label. Just create three labels with the following names: