Web Folders is the Microsoft term for an internet connectivity method called WebDAV, though you will see it called simply a “Network Location” in Vista and Windows 7, or a “Network Place” in Windows XP.
WebDAV stands for “Web-based Distributed Authoring and Versioning”. It allows users to collaboratively edit and manage files on remote web servers [...]

To avoid encountering setup errors, consider installing this Software Update for Web Folders at Microsoft.com, before proceeding with the setup steps.
If you use Internet Explorer you can use One-Step Setup.
Web Folder setup steps for Windows XP and Windows 2000

Double-click on the MY NETWORK PLACES icon on your Desktop or from your START button.
Click on [...]