Here is an example of how it is not a normal folder that can be used in a path.
In explorer go to: C:\Documents and Settings\UserName\NetHood
Note that address is displayed in the address bar.
Now enter a share, you will see the address bar now shows the UNC path of the share and it does not include the path to nethood anymore. Thats what I getting at when I was trying to say the folder is really "translating" the actual path for you.