By default it keeps every notes in your My Documents folder. Personally I don't add any additional folders as it seems to do odd things in Outlook when I sync them. I categorize my Notes within Outlook as that is where I use / access them the most. I sync them with WM in order to have them handy when I need them. However, WM Notes doesn't support / use categories
It's definitely a very simple application, and not really great for hundreds of notes.