From Mac Guides
The home folder is each user's own space in Mac OS X.
A user's home folder is automatically created whenever a new user is created. Home folders reside in the Users folder at the root of the computer's hard drive. Each one is a separate, semi-private space by default, which other users cannot access. The Users folder also contains a Shared folder, where all users have equal access to files.
The home folder is one place OS X really shows its UNIX roots. Users are advised to keep all of their files within this folder (or the Shared folder). This is a departure from pre-OS X days, where users had much more flexibility about where to store files. For non-administrator users, this really is about the only place they can save or edit files. UNIX shorthand for the home folder is ~/.
Every home folder has a default set of folders that show up with custom icons. Users are encouraged to save files in these folders or to create new folders within their home folder.
The home folder has a number of standard subfolders.
This folder is the user's Desktop. Exactly the same files and folders appear here and on the actual desktop, with the exception of mounted volumes (disk drives, CDs, network volumes). This is different from pre-OS X days when the Desktop Folder was hidden in the Finder and each volume had its own Desktop Folder.
The folder designated for all a user's documents. Some applications will try and save here by default.
A folder added in Leopard for Downloads from the internet, by default Safari will save here, but it is also recommended that users change other apps that download content to this folder as well.
The folder where all user-specific application support files, preference files, and cache files are stored.
The folder designated for pictures and photographs. iPhoto keeps its library database file and all related image files here by default. This is one place the Desktop & Screensaver System Preference panel looks by default for desktop images.
The folder designated for easy file sharing with other users on the system. This is one of only two folders in the home folder that allows for read access by other users. It does not allow for write access, but contains a Drop Box folder which is set to write-only access.
The folder designated for a user's personal Web page. This folder is also read-only for other users on the system. It is also accessible via a Web browser if Personal Web Sharing is turned on.