A directory is a part of the filing system containing the data that makes up your site. Directories are made up of files and sub-directories.
File: smallest component of a filing system (used to store all the pages that make up your site).
We show a list of your most frequently accessed files and directories. The list allows you to drill down into the pages of your site.
The point is that you can drill into the different parts of your site and see how many visitors they received.
The report is based on the directory structure in which the files & directories that make up your site are stored. You can drill further down into that directory or sub-directories.