Obvious? Then you must be in favour of Apple's move to 'at most one level of hierarchy'. Or do you find the concept of drawers inside drawers inside drawers intuitive?
Not to comment on how it works in a UI, but my chest of drawers at home does indeed have two levels, there is a smaller drawer (for socks) inside the main top drawer.
Call 'em "boxes" or "bags" for all I care - the point is the geek word "directory" isn't suitable for non-technical people, I think everyone understand the concept of "putting things in things" because they do it all the time in the real world.
I haven't seen the word "directory" widely used amongst laymen since the move from Windows 3.x to Windows 95, where if my memory serves me (I was 9 at the time) Microsoft made the change to "folder" themselves.