What is the difference between a public and a private folder?

Every folder is one or the other, and it decides who in the workspace can see the work inside it.

Public means all workspace members can reach it. That is the default and it is usually right — a team workspace whose folders are all private is a team that cannot see its own work.

Private means only the specific members you name can reach it, each given full access, edit or view only. Use it for the genuine exceptions: a disciplinary matter, a salary review, an acquisition nobody has been told about yet.

Public and private are about the workspace's own members. Neither exposes anything to people outside the workspace.