What Does Top Level Folder/Directory Mean?

The top-level folder or top-level directory (same thing) is a reference to the root level of a project.

So if you have a project structure like this:

your-project
   > Components
        > Header
        > Footer
    package.json
    README.md

The top-level directory is your-project and everything inside it are top-level files & folders. You can also call them “first level” files so then in the example above, the files inside > Components are second level folders.