I've been using the hell out of Kindle's "collections" feature (read: folders) since Amazon launched it last year. Currently, I maintain four collections:
I treat the main, root folder as the fourth collection, and it's where all the articles I send to the Kindle reside (and I send a ton). (These days I mainly use Klip.me for this purpose.) Because I usually have 30-50 articles on my Kindle, and because you can't (yet… *fingers crossed*) target a particular collection when sending content to the device, it makes the most sense for the largest, most fluctuating content to sit in the root folder. If I didn't do it that way, then I'd be constantly moving articles to another collection, on an article-by-article basis.
I usually have 8-12 books on my Kindle at any one time, and this queue changes much less frequently than the articles because, well, they're books, and take a bit longer to cycle through, thus justifying them getting their own folder.
The "blog" folder is for articles I may want to link to here. When I'm done reading an article I determine if there's a chance I'll want to put it here on the site; if so, it gets moved to the "blog" folder. Every so often I'll put my Kindle on my desk and run through all the articles in this folder, and link/discard as appropriate. As with books, when I read articles I do a lot of highlighting, and so if I want to quote from an article when I link to it, I usually only have to quickly page through it again until I come across any highlights (which I'll then find in the web-based article and copy to my post).
The email folder is, as you probably have guessed, where articles go that I may I want to email to someone later. I'm a notoriously prolific emailer of articles and so this folder sees some serious action.