This text was taken from The Official Red Hat Linux Reference Guide
An operating system's filesystem structure is its most basic level of organization. Almost all of the ways an operating system interacts with its users, applications, and security model are dependent upon the way it stores its files on a primary storage device (normally a hard disk drive). It is crucial for a variety of reasons that users, as well as programs at the time of installation and beyond, be able to refer to a common guideline to know where to read and write their binary, configuration, log, and other necessary files.
A filesystem can be seen in terms of two different logical categories of files:
Shareable vs. unsharable files
Variable vs. static files
Shareable files are those that can be accessed by various hosts; unsharable files are not available to any other hosts. Variable files can change at any time without system administrator intervention (whether active or passive); static files, such as documentation and binaries, do not change without an action from the system administrator or an agent that the system administrator has placed in motion to accomplish that task.
The reason for looking at files in this way has to do with the type of permissions given to the directory that holds them. The way in which the operating system and its users need to utilize the files determines the directory where those files should be placed, whether the directory is mounted read-only or read-write, and the level of access allowed on each file. The top level of this organization (/ directory)is crucial, as the access to the underlying directories can be restricted or security problems may manifest themselves if the top level is left disorganized (security=organization) or without a widely-utilized structure.
However, simply having a structure does not mean very much unless it is a standard. Competing structures can actually cause more problems than they fix. Because of this, Red Hat has chosen the most widely-used filesystem structure and extended it only slightly to accommodate special files used within Red Hat Linux.