Understanding how Sharing and permissions work in Google Drive is probably the most important step to using Drive safely and effectively. One of the key distinctions is between View and Edit access of Files and Folders. You can set-up Sharing on both. If you give a person View or Edit access to a folder, then that permission applies to all of the files and subfolders within that folder (unless you specifically tell it not to). This is what we call “cascading permissions”. This is why we have to be careful when sharing a folder with someone; you may be giving them access to files that should be more private.
In addition, there are some particularly nasty problems that can occur if another person has Edit access to a folder. These problems are explained by Jeff Warner from the Tech Training Centre at the University of Alberta in his YouTube video. In essence, someone with Edit access to a folder can remove files from that folder in addition to adding or editing files. When they do remove a file, they instantly lose edit access to it (since they had gained edit access because of the folder it had been in). In addition, the owner of the file has that file removed from the original folder and it reverts into the All Items location. The file is still recoverable for the owner, but depending on the naming of the file, it can make it very difficult to find.
The bottom line is this: be careful when moving files around from folder to folder. You may inadvertently change who has access to that file. Instead, set aside some time when all of the editors of a particular folder can work together to clean it up and ensure that everything is in its proper place.