Auto-managed backing folders are placed in a special area managed by Switch, i.e. "the application data root" (see Switch preferences: Application data).
User-managed folders are placed in a location selected by the user.
To create a folder element in Switch
If you check the Path in the Folder properties, you will see that the value "auto-managed" is filled in automatically.
If you check the Path in the Folder properties, you will see that the path to the folder is filled in automatically.