"Introduction To Computers" courses apparently don't teach the concept, because users who aced such courses still have no clue. Even people who know lots of advanced stuff sometimes don't understand that their files are in a folder on their C: drive or whatever — I have a friend who knows SQL, C++, and Linux, but doesn't know the locations of her files.
Could it be a gender thing? It seems that the people who I've observed having this problem are all female. I remember reading about studies that show men and women navigate roads very differently; perhaps file system navigation is incompatible with the intuitive navigation method that women use?
It's a very important concept. Once you understand how files and folders (which I still like to call "directories", but I digress) work, everything on the computer becomes much easier. You become less dependent on your applications to keep track of everything for you. Backing up and restoring files becomes much easier.
How can I teach people this concept in a way that will stick? It's so intuitive to me that I don't know how to make it into lessons, it's just second-nature.