Insimenator.org

Subfolder

Some content can also be placed in subfolders. Subfolders are folders within folders - a "Floors" subfolder of Downloads would be My Documents\EA Games\The Sims 2\Downloads\Floors. What content can go in subfolders depends on what expansions you may or may not have installed.

There does not seem to be a real limit to the amount of sub-sub-subfolders you can do (i.e. My Documents\EA Games\The Sims 2\Downloads\Paintings\Base Game\The Lady on Red\) besides limits that may be imposed by your hard drive's file system.

If you have an NTFS file system, you are limited to no more than 255 characters for the full path and filename of a file. You likely never hit this limit unless you are insanely anal about organizing.
Original and University

If you only have The Sims 2 (original) or the University expansion, you are somewhat more limited than otherwise in subfoldering content.

    The following items CAN be placed in subfolders under Downloads:

        * Floors
        * Walls
        * Object Meshes
        * Object Recolours
        * Hacks
        * Hacked Objects
        * Custom Careers
        * Body Shop Meshes (Hair, clothing, and accessories meshes)

    The following items CANNOT be placed in subfolders under Downloads:

        * Sims
        * Skintones
        * Eyes
        * Eyebrows
        * Glasses/Accessories Recolours
        * Makeup
        * Beards and stubble
        * Hair Recolours
        * Clothing Recolours
        * Collections (within the My Documents\EA Games\The Sims 2\Collections folder)

This non-subfolderable content (with the exception of Collections) can, however, be placed in the My Documents\EA Games\The Sims 2\SavedSims folder instead of the Downloads folder. They cannot be placed in subfolders under SavedSims, but by placing sim-related content in SavedSims (and renaming the files) you can keep yourself fairly well organized... even if you can't put those items in folders.
Nightlife and Later

If you have Nightlife or later expansion packs (Open for Business, Pets, Seasons, etc.) you have much, much more freedom in subfoldering your content. In short, you do not have the limitations listed above, and can subfolder just about everything however you like.

Certain hacks may misbehave if placed in subfolders. Place them in the main Downloads folder if they don't work in the subfolders.

Collections (within the My Documents\EA Games\The Sims 2\Collections folder) cannot be placed in subfolders.