How do I add a second (and third) level to the folders?

From within your space, you can have up to three levels of sub folders for conversations, tasks, and documents.  To add a sub folder, go to the conversations, tasks, or documents tab and hover over a folder on the left side of the page. Click the drop-down arrow that appears.  Then click “Add folder.”  

When viewing all conversations, tasks or documents with sort set to none, you can also see a full list of the available folders at the top of the page.