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A favorites group is a collection of favorites and groups that are usually logically related. For example, you might create a group called Newspapers that contains links to The New York Times, The Washington Post, and so on. The group might also contain groups called Michigan Publications and Libertarian Press, which contain favorites to URLs related to those themes.
Favorites groups are displayed in the Favorites portlet only if you
select the Hierarchical display method on the Edit Favorites Portlet
Settings page. Favorites groups are designated by the
icon:

If you select the Flat List display method, favorites are shown without the groups to which they belong:

For more information go to the documentation section of Portal Center.
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