Helping people with computers... one answer at a time.
A top-level folder is one that appears at the root of a drive. I'll explain what that means by looking at files and folders in Windows Explorer.
In some instructions, you indicated that I need to "create a top-level folder called backups " for my backups; where and how do I do this? Are the folders created in My Computer? Does the external hard drive have to be connected? Or are they created on the external hard drive?
This is another case where the terminology makes some assumptions about your familiarity with computers.
Assumptions that, naturally, aren't always valid.
So I'll give a quick refresher on just what drives and folders are and how they're organized. Then, I'll describe how Windows organizes things, which may seem very confusing at first glance.
Right-click the Start button and click Open Windows Explorer:
Ignore everything but the section labeled "Computer"; I'll talk about the others briefly below.
As you might expect, Computer represents your computer and everything stored on it or connected to it. Listed underneath it and indented are the various drives that are attached to the computer. As you can see, I have a number of drives; I'll list them by the drive letter that they're assigned.
A: is the floppy-disk drive. No, my computer doesn't actually have one, but someone insists on reserving the A: designator for it.
B: is actually a USB external hard disk and the drive on which Acronis TrueImage Home places my backups.
C: is my system drive. (one terabyte)
D: is a second internal drive. It's also one terabyte, even though its label might indicate something less.
E: is the CD/DVD reader/writer.
F: is a mounted TrueCrypt volume. A file that I've called data.tc that lives on C: and its encrypted contents are available as unencrypted files and folders by virtue of being mounted.
G: is a USB-connected SD-card reader with nothing in it.
H: is a USB-connected CF-card reader with nothing in it.
L: is a virtual drive created by Daemon Tools that allows me to mount and examine the contents of ISO files.
P: is another mounted TrueCrypt volume. This time, it's a file (personal.tc) that resides on F:. Yes, TrueCrypt volumes can reside in other TrueCrypt volumes.
It's a lot, but I list it all to show the diversity of the things that we call drives. Not only are traditional internal hard drives included, but external drives, virtual drives, and more.
The key point is that each of them looks like a disk drive and is accessed like an independent disk drive.
Together, they represent everything stored on or connected to your computer.
If I click on the B: drive, the right-hand pane displays the contents of B:
Items with the yellow folder icon are folders. In this case, "example_file.txt" is simply a file.
If I now click on the folder "acronis", the right-hand pane displays the contents of that folder:
As you can see, this folder "acronis" contains both a folder ("example_folder") as well as several files that contain the backup that Acronismakes for me each night.
Of course, the folder "example_folder" could contain more files and folders and those folder could contain more...
Finally, I get to answer your question.
Folders contained within folders are called sub-folders. In the example above, "example_folder" is a sub-folder of "acronis".
Items which are not sub-folders are those that are visible when you look at the contents of the drive.
Those are top-level items.
The folder "acronis" in the example above is considered a top-level folder because it's a folder that's placed directly on B: and not within some other folder. The folders "$RECYCLE.BIN", "acronis.apr", "My Backups", and "System Volume Information" are all top-level folders.
You can create a top-level folder very simply. Just click the drive in the left-hand pane to display the top-level contents, right-click in an empty area in the right-hand pane, and click New and then Folder:
When you do so, a new folder will be created with the name "New folder":
It may already be selected and ready for you to type in a new name. If not, just click it or press F2 with it selected and you'll be able to type in the name you want:
Look back at the list of items that appeared on the left when you opened Windows Explorer.
Everything that isn't Computer or indented under Computer is either:
A type of† shortcut to some sort of Windows functionality.
A type of shortcut to an application stored somewhere within Computer.
A type of shortcut to files or folders that are somewhere within Computer.
A full explanation is an article for another day, but I'll throw out one example.
In the list of things on my computer on the right under Desktop, you'll see an item "LeoN". LeoN is my Windows login ID and that's nothing more than a type of shortcut to "C:\Users\LeoN", a folder that you'd also find under Computer in the folder called Users.
In Windows XP, you'll often see My Computer here. That is also nothing more than a convenient shortcut to "C:\Documents and Settings\LeoN\My Documents" (assuming that the login name is "LeoN").
So while My Computer or "LeoN" or even "Desktop" might seem like the top of something, they really aren't. It's just Windows making commonly accessed features and functionality visible at a high level so you don't have to go digging to find the right whatever-it-would-be somewhere in Computer.
† I keep saying "type of" shortcut because a shortcut is actually a very specific thing: a shortcut file that contains a reference to another file. The items that show here in Windows Explorer may actually be true shortcuts or they may be things the behave much like shortcuts, but are implemented in entirely different ways. I did warn that it was confusing.