To expand on what
jrv posted:
All files on a single disk have an entry in a single master index file, no matter what directory they are in. The directories themselves are (special) files and are also entered in that master file. It is possible to have a file in the master index but not in a directory, though that is an error that
chkdsk will fix by putting any un-directoried file in a (newly created) "found" folder. Assuming no errors, a file will be listed twice, master and directory.
The user has no control over the size of the master file list (every file will be there), but can decide to limit the number of files in his/her created directory (Windows and SW packages make their own choices, usually with little user input). Breaking up user files into multiple directories can have advantages, but the main one is ease for the user to find the approximate location when sorting in own his/her head. The complexity and thus overhead for the PC to find a file goes up roughly with the logarithm of the number of files in the master index and containing directory, IE not too fast. Some earlier versions of operating systems on older, slower machines were helped by keeping the number of user files in a directory down, but these days it's much less of a problem. The main advantage is you are not faced by an endless wall of files when looking in a directory, IE easier on your eyes and your head.
There is another aspect - the brand new PC/laptop. My current laptop had a SSD drive as "C:" (118 Gb) and a traditional hard drive (919 Gb). When setting up my user account, it put the base user directories on the C drive. As the C drive had all the Windows stuff, there was limited available space. Windows does have the functionality to redirect the user file directories like "Music", "Documents", etc to another drive and I moved most to the D drive. I left a few including the AppData (used mainly for application working disk space) on the C drive for speed as those didn't use much disk space.
Having most of your user files on another disk than the system (C
drive not only means that you are less likely to fill up your system drive, but the system drive will always be the busiest and by splitting operating system/SW packages on one and user files on another means that the two disks can work in parallel. Your PC can be reading, say, a video file (on the D drive) at the same time it is paging (on the C drive) rather than waiting for one to finish before doing the other. In slack times there will be little difference but at busy times it can make a great difference.
While I haven't done it much, it is possible to have a file referenced in 2 or more directories. Put the file in the first then create a short cut to that file in the other directory/directories. Ditto for directories. I have a contacts directory on my C: drive (C:\users\paul\contacts) in my user base directory (C:\users\paul) and also a shortcut in my D: drive documents directory (D:\users\paul\documents) to that directory. That's purely to make it easier for me to find.
In summary, having multiple user directories will likely give you a small performance boost but what does give you a real boost is to spread your user files over multiple drives.