Once upon a time, when OneDrive was still called SkyDrive, the words “album” and “folder” meant the same thing. The only difference was that a folder containing photos was called “album”. Nowadays the term “Album” describes something totally different.
OneDrive still has files and folders, of course, but when you click Photos, over in the left sidebar, you are taken into a “new world”.
That “new world” lists All Photos, Albums, Tags, and Places in the menu bar.
So what are those? For this article we will stick to just Albums.
Let’s step back a bit in time. Older folks may remember the card catalogs in libraries, real libraries with books on shelves. 
The card catalogs were organized by title, some by subject. Once you found what you were looking for there was a reference to the actual location of the book – I am simplifying just a little. What I am trying to say is that you got a reference that led you to the book.
Well OneDrive Albums work in a similar way. What you can place into an Album are not your actual photos but references to them. When you add a photo to an Album, the actual photo stays in the folder that it is in, but you can see the photo in the Album.
Making an Album
It may help to understand Albums better by going through the steps of making one. When you are in Albums there is an option on the menu bar, + New album.
The + New album link brings up options to select the photos to add to the album either from Choose photos with the photos in date order (illustrated here) or Choose from folders, with the folders arranged just the way you see them when you first log into OneDrive (illustrated below next).
It is possible to select any photos, located anywhere in OneDrive, with no regard to their present sharing settings, and add them to an Album. The photos are not moved, they stay where they are. In the Album the photos are merely “referenced”, but you can see them.
You can arrange the photos in the Album as you like. The Album can be shared, just like a folder or an individual photo. Photos can be included in other Albums. Remember, the actual photo files stay in their actual locations.
Albums are very neat ways of showing and sharing photos in whatever grouping desired, however many, or whatever order. Neat, yes?
© 2016 Ludwig Keck
Ask Ludwig 
Thank you for the explanation. This is an unsatisfactory method for me as my photos are already sorted into albums on my PC and I merely want to copy these to OneDrive for sharing purposes. I do not see any sense in uploading and then repeating in OneDrive the sorting that I have already done on my PC! There seems to be no way to simply drag a selection of photos from the PC to a new OneDrive album. To do this, I will need to use a difference service provider. Sad
Maybe you are thinking of folders on your PC as albums. OneDrive still has the normal folder organization and you can drag photos to them. Don’t get confused by the new nomenclature.
Thank you…but i do have some questions. I know I can test and find the answers alone but I’ll allow myself to be lazy this time:)
When deleting a file from the album? does it also delete the file from the “real” folder? and what about the other direction?
And what happen when I delete a file from the smartphone itself…will the photo that was already synced to my onedrive be deleted too?
Microsoft keeps making “improvements”, so it is not possible to say what and how things will work tomorrow. On “albums” there is a “Remove” option that removes a photo from the “album”. “Delete” (normally) means just that, so be very cautious with anything by that name. I do not know how smartphone syncing works. In the past when deleting an item it would be deleted everywhere.
HELP! I created an album in OneDrive (Windows 10) gave it a name and saved it. It was supposed to appear in the Albums’ section of OneDrive, but neither the section appears nor any reference to the album’s name. Where in the hell did it go?
Normally you go to Photos in the left navigation pane and then find the Albums tab. If your album is not there, I suspect what you did is to create a folder, not an album, and placed your photos there. Click Files in the nav pane and see if you can find it there. Let me know if that works and you find it. If you continue to have problems send me a message (upper right). Good luck!
I find the folders/photos/albums mechanisms extremely useful. The one thing I do not understand is why the sort order of photos in an album is arbitrary. The article mentions that it mis possible to arrange photos within an Album. Can you explain how to do it?
Unfortunately photos in an album cannot be rearranged. It is possible to do so in a folder, but that is of little use when you want to put a picture story together in an album to share.
Is there a way to easily export photos from onedrive into a photo album maker (such as blurb or shutterfly?). I know how to create an album but not where it resides in my folder structure.
Hello Nik,
The short answer is, “not an easy way”. It is not that hard, however.
OneDrive albums still work as this three-year old blog post describes. An album consists of references to the photos which may reside anywhere in your OneDrive. The photos are not copied to a separate folder, The is a download option in the top menu bar, above the photos in your album. What that does is it allows you to download copies of everything in the album. It does that as a zip-file.
Click Download and you will see the usual download bar. I like to right-click on Save to get the Save As option so I can specify a location on my computer. For something like an album I just put the sip-file on the Desktop.
Once it is downloaded, right-click on the zip-file name (it will be the same as the album name unless you changed it for the download). Then click Extract All. A new folder will be created with copies of the photos in the album.
You can then upload to your other destination. A bit awkward, but it doesn’t take too long.
Thank you very much for asking. I’m delighted that you found this old post.
Finally I understand a little more about One Drive, Thank you!
Do I understand correctly that the basic difference between a folder and the album created with all pictures in that folder in Onedrive is that one can share the album but not the folder?
Do you have any articles explaining how Places and Tags are supposed to work? I did some testing and either I didn’t understand how they work or they don’t work. Thanks.
Thank you steu2015. Since I wrote this article Microsoft has made many improvements and changes to OneDrive. You do not quite understand the difference between folder and album. You can share folders and also albums. Folders are best thought of as actual file locations. Albums are collections of photos located in one or more folders and can be seen together. Albums are thus references or pointers to the photos. Tags are assigned by you or OneDrive (yes) and describe the photo subject, place, etc. The Places tab shows the photos organized by their geo-tags. Your comment has shown me that I better update this post and explain better how OneDrive works nowadays. Thanks again.
I appreciate your quick clarification. I didn’t understand the difference until now.
Maybe some of my old pictures do not have a “geo-tag”….
Probably it would be helpful to read an updated version of your article. Maybe search by people (face recognition) is also available by now. Thanks.
Back in the days of Photo Gallery (some 8 years ago), face tagging and face recognition worked pretty well. That has not been updated and carried forward as far as I know.
Thanks for this incredibly helpful article. I’m disappointed Microsoft simply has made a way to use up storage space, instead of a useful process for moving photos around. Thanks for helping insure that I don’t delete anything unintentionally. It seems odd they would not realize people would want to use “Albums” to organize their storage, rather than some annoying place to copy photos to.