What do you do with the folder when you find it? As its name implies, any compatible media that you drop in there—MP3s, QuickTime files, AIFFs, WAVs, and so on—will be added to iTunes the next time it opens. So you could create a Dock shortcut to this folder for easy drag-and-drop access if that’s your cup of tea.
You can also tell any program that you normally get media downloads from (like Mail or Safari) that your “Automatically Add to iTunes” folder is the default location for those downloads. In Mail, this option is available under the menu item Mail > Preferences (it’s on the General tab).
In Safari, it’s similarly found within Safari > Preferences under the General tab.
What that means is that any music or movie files you download will just be added to your iTunes Library by default from now on, without any hand-holding or file-dragging required. It’s a pretty efficient method.
So what does iTunes do with files that get dropped in that folder that it can’t handle? Luckily, it doesn’t delete them or do anything else really funky. It’ll just create a subfolder called “Not Added” and then pop the non-iTunes content in there, organized by date-stamped subfolders.
Those folders never get cleaned out automatically, so you might want to keep an eye on what’s hanging out within them. You know, so you don’t fill up your hard drive with random Web PDFs or something.