There is a media library (accessed via the Media Tab in the Admin section). Images and folders can be created within this section.
The Media Section is used to store images/files that are part of other content types but are not site content in their own right. (Images in galleries that appear in the site can also be used in the rich text fields of other content types.)
The Media Library can contain the following content:
Folders
Files
Images
Video
Flash
Portals
Content in the media library is not accessible from the public view of the site.