You should be able to go to manage librarys and set the folder structures up. You will need to set the upper folder first and then all other folders under that. I do not know what permissions are required to do this. I have admin. permissions and have been able to set-up folder structures. Hope this helps
Look like someone's been using Project Hierarchy, what you have there is a hierarchical display of projects not libraries. Have a look in your master param file for info on how to activate this and define the separator.