Folders finally made it to Windows Phone in the recent roll out allowing you to club live tiles together in a group without losing the LIVE feature. I tried out the Folder feature and it was interesting for many reasons though it still has bugs to make it even more responsive.

Video Demo

Features:

First make sure you have the app tile on the start screen. This feature works only from Start Screen
Now Long press a tile and move it over another tile in such a way that it almost over it but not exactly over it. This will enable a grid box with small square boxes right beneath it. This shows your folder is ready. Release the tile now.

Now if you tap on the folder, it will expand and display the tiles inside it. Tap to launch any of them.
If you want to remove any of them, long press and drag it out anywhere. There should be at least one tile for the folder to exists, else it will disappear.

That said, folder creation is hit and miss as of now. The tiles keep moving back and forth when another tiles hovers over it. This is by design but if you get one tile almost one third over it from the corner it works. Hopefully this will get smoother in coming updates.

How to name / rename a Folder ?

When you create a folder for the first time, it has two white thick border. One on top and one at the bottom which is visible when its open. Long press on the top border like and a text box appears. Type in the name and press ok. This will now have a name on bottom left of the tile when its in medium and large sizes.

To use this feature, you will nee to install the dev preview. Follow the steps here to install the dev preview.