Xray v3.0 introduces the Test Repository concept which enables the hierarchical organization of Tests at the project level by alowing users to organize Tests in folders.
This is a different approach from the traditional way of organizing Tests in flat lists by using Test Sets, which was the only available method before Xray v3.0.
Users coming from legacy Test Management tools may find this approach more natural and intuitive. Other organizations may prefer to not enable this feature at all and choose the Test Set approach instead. There are more some pros and cons on using this kind of organization but both concepts can live together.
A new custom field "Test Repository Path" for Test issues can be included in the respective screens, to see the Test Repository folder where the Test is included in.
While the Test Repository concern is related with the organization of Tests in the scope of a given project during the specification phase, the Test Plan Board concern is on organization at planning level (and as consequence, at execution).
The Test Plan Board gives you the possibility to organize the Tests that are part of your Test Plan in multiple folders and sub-folders. Implicitly, you can also define the order of the Tests and the relevance of those grouped Tests (i.e. folders) by ranking them within the tree presented within the Board.
By providing you the ability to define groups and sub-groups (i.e. folders and sub-folders) for the Test Plan's Tests, you're able to track them independently and see right way their current status, even if the scope of the Test Plan is broader. You can also more easily do operations for those subset of Tests, such as creating Test Executions .