Once you have this file, you can add as many folders as you like, up to 5 nested folders deep, to organise your collection of downloads.
To fix this, Electronic Arts created a configuration file that instructs The Sims to also search for mods within folders inside the main Mods folder. However, by default, The Sims 3 does not support this and can only see mods in the top-most Mods folder, and not in any folders inside that.
Many players like to organise their downloaded mods into folders.