In the App Router each folder is a route segment that maps to the URL. A layout.tsx in a segment wraps all child pages and layouts below it; nested layouts compose and can persist between navigations, enabling shared UI like navbars or sidebars.
Expanding on the short answer — what usually matters in practice:
A tiny example (an explanation template):
// Example: discuss trade-offs for "how-do-route-segments-and-nested-layouts-work-in"
function explain() {
// Start from the core idea:
// Routing is file‑system based. Each folder under app/ is a segment; a page.tsx renders that
}