Has Microsoft done away with folders in their upcoming OS? Just curious. What about the file systems of other OS's out there? It is indeed true that folders are the least efficient aspect of operating systems but it is strange that we're still holding on to them.
I don't know if you could call it the "least efficient" - they seem (to me) to be a simple way to understand what and where something is. Look at the problem users are having with Mountain Lion's "Save As" feature to see what could go awry once you start abstracting the user away from files.
Let's look at two examples of most-used aspect of folders. A document file and photograph file.
For me, the least efficient aspect comes with not being able to store a single document at multiple places (folders). If I have a document on Subject A written by Author B and C (two authors), than I may want to have this single document show up at multiple places, for example, the Subject A for me could be XYZ, ABC etc. The best I can do is create shortcuts of this file in a multiple folders (I shouldn't duplicate the file). So here, the tags would come handy.
Now, I don't know about you but I have spent significant amount of time thinking over how to folder my photographs (and I am not a professional so not talking in GIGs).
All in all, the folders are not very efficient on their own.