Hey Eric,
After you tell EE the path to the directory where you want files to be saved, every time a new template group is created a new sub-folder will be created in that directory.
After a new template group is created, you open the index template that is created automatically, and save it as a file. On your server you’ll then see the new sub-folder created that has the name of your template group. Inside of that folder you’ll see index.php which is the way EE saved the index template that was in that template group.
So if I create a new template group called “includes” and then click on the index template and save it as a file, when I go on to my server I’ll see a new sub-folder named includes and in there will be a file called index.php.
If I remember correctly, in the videos he’s set files to be saved in the system/templates folder. So all of your template groups will have sub-folders in there, and within each folder you’ll have at the very least an index.php file, in addition to whatever other templates you’ve created and set to be saved as files.
Now, CSS, images, javascript, and things like that can all be created outside of the EE system folder and exist independently of EE’s templates and groups. A good idea is to do what lebisol said and create a new folder named assets and store them like:
site.com/assets/mystyle.css
site.com/assets/images/some.gif
Hope this makes sense.