I use folders (partially)
I know for most people they are not needed and I can imagine may cause some friction in thought as it can be hard to let go of habitual thinking patterns. However, my situation is slightly different. Folders are very useful for my own personal situation.
I do for the most part not rely on folders. Obsidian’s search is brilliant. I also create tables of content and all the other general haul marks others use or adapt.
So folders may seem unnecessary, and they are for the most part. Except I am a survivor of a brain injury and as a result, I can and do have sudden memory loss, fog and other symptoms. This sometimes renders me unable to recall words in thought, names, follow the logic and so forth. When you also add in thousands of notes (as journalling is key to me remembering (not just changing my story) my vault gets messy, I can sometimes forget to add important things to a table of content and so forth. ( on that note I also have a folder where all notes that require adding to a TOC are placed until I add them to a TOC before dumping them in the general dump folder)
So my solution is I keep all my tables of content in a folder (and category subfolders) so no matter what I can keep on top of things and find things easily. I also have an “emergency folder” of key everyday things (including my guides to recovering my memory) in a top-level folder. So I really value folders for this.
I am also building a community project to publish and realise I need folders for this for other reasons on obsidian publish
I know I could star some of these but the star or favourite system doesn’t allow for as much order and categorising. Hope that helps with one perspective for folders.