Zotero offers two primary means of organizing items: tags and collections (folders). Tags are typically used to relate items across collections with some type of keyword. Collections allow you to group items together much like folders would and even allow a hierarchical structure like a file tree. Unlike traditional folders, however, items in Zotero may be in multiple collections without duplicating the item (think playlists in iTunes or Amazon).
To tag an item, ensure the appropriate item is selected in the center column of the Zotero window, then select the tag tab in the right column and click 'Add.' Type the desired tag in the text box and hit the return key. If the desired tag has not yet been created, this process will also create the tag and add it to the tag selector box at the bottom of the left column. Remove a tag from an item by clicking the minus sign to the right of the tag.
Items may also be tagged with the drag-and-drop method. This could be particularly useful if several items need the same tag, perhaps all the items in a collection. Select the items and drag them onto the desired tag in the tag selector box at the bottom of the left column.
Zotero can also atuomatically add tags to items from specific sites or databases. Zotero does not create these tags but pulls tags provided by the database. These tags may or may not be helpful. Each site or database tends to have its own set of tags which results in inconsistent tagging for similar (or even the same) items. Turn this option on or off in the preference pane.
Collections are typically created by clicking the 'new collections' icon at the left end of the Zotero toolbar. A box will appear prompting you to title the new collection. Type a title and hit the return key to create it.
Create a sub-collection by dragging any collection onto another collection. As with item attachments, a small triangle will appear to the left of the parent collection allowing you to show or hide sub-collections.
There are a couple of ways to add items to collections. Every item added to Zotero is added to the master collection 'My Library'. You cannot delete this collection. Add items to created collections by selecting an item in the center column and draggin it onto a collection in the left column. Remove an item from a collection by selecting the item inside the collection and hitting the delete key. No dialog box or warning will appear. The item will simply be removed. (To completely remove an item from Zotero, right click the item and select 'Move item to trash.' A warning will appear letting you know you are about to completely remove an item.)
You may also add items to a collection as you are initially adding them to Zotero. When an item is added to Zotero, it will be placed into whichever collection is selected in the left column at the that time in addition to the master collection 'My Library.' Zotero will also indicate to which collection the item is being added at the top of the pop-up dialog box. This may be very helpful when resources are added for a specific paper or project. Just be sure items are being placed where you want them (you may always select 'My Library').