Browse to the game you wish to put into a folder and press TRIANGLE to bring up the menu. Select “Information” and edit the “Group” property. The name you enter here will be the group. To add another game into the same folder, you must edit the group information of that game to match the folder name. There is no option to add multiple games into a folder, this must be done manually.
Similarly, you can use the same technique to group photos, music and videos into folders. Grouping can only be done on firmware 2.00 or greater.