Earlier quoted context omitted.
I have helped a computerphobe (hates computers and Internet, clueless, but must use them) with Dropbox. She gets that her folders on various computers around town are synchronized. I had a very difficult time explaining to her that her same folders and files are available via the web interface. Those people are out there.
Most people (as in the majority of the population with access to digital media) have a very difficult time understanding that the filesystem is a hierarchy. I'm always espousing the necessity of backups to my friends/family, which means I've usually got the role of setting up a Dropbox account for someone without a technical background. When I say that their "My Documents" folder is a level above their Dropbox folder…
You might get a blank stare, because Windows itself has been trying (somewhat unsuccessfully) to move away from this hierarchical model, blurring this metaphor. Consider the Libraries feature, which can essentially collect many folders (My Documents, Dropbox\Documents) and can represent them as a single virtual library.
Similarly, "Favorites" further serve to flatten this hierarchical model (Desktop, Downloads). And finally, consider things that look like folders but aren't physical folders at all (Recent Places).
I actually didn't understand your "level above" analogy either. On Windows 7, the My Documents is:
C:\Users\barik\Documents (appears as My Documents but the folder is actually called Documents, hah!)
and
C:\Users\barik\Dropbox
which is at the same level?