When reading excellent Tony's explanation in the FAQ, pay attention to the fact that playlists are not just folders in the sense of, say, Windows filesystem. They are collections of references to tunes (something akin to Windows shortcuts or Unix links), so, for example, Tony's "Low key" playlist contains tunes that are also members of their respective artist/album playlist hierarchy (which itself is, of course, usual but optional way of organizing tunes). In other words, one can, without duplicating tune files (actual mp3s) have several different "views" of their collection.
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Dragi "Bonzi" Raos
Q#5196
MkII #080000376, 18GB green
MkIIa #040103247, 60GB blue