From Mac Guides
The applications folder is where the majority of the programs on your system are kept. It is found at the very base of the main disk drive, called Macintosh HD by default. For a better idea of how things are laid out, have a look at the OS X map.
You can arrange the programs in this folder how you like. You can create sub-folders within the Applications folder if you wish, in order to sub-divide your programs. However, it is considered advisable to avoid moving around any of Apple's own programs as this may confuse Software Update when future versions are released.
You can drag the Applications folder itself to the right side Dock, allowing instant access to all of your software. Control-clicking this folder will pop a submenu of it's contents.
Most programs are installed by simply dragging their icon into the applications folder. For more detailed instructions on adding software, see Installing Applications in Mac OS X.
Generally you can remove a program from your system simply by moving it from the Applications Folder to the Trash. For more information on removing software from your system, see Uninstalling Applications in Mac OS X.
You may also have a separate folder on your main disk drive for Classic applications. This will be called "Applications (Mac OS 9)". When installing new programs that still use Classic you can choose to install them into this folder or you may install them in the normal Applications folder.