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There are two main directories used by Ren'Py games.
The base directory is the directory that contains all files that are distributed with the game. (It may also contain some files that are not distributed with the game.) Things like README files should be placed in the base directory, from where they will be distributed.
The base directory is created underneath the Ren'Py directory, and has the name of your game. For example, if your Ren'Py directory is named renpy-6.10.1, and your game is named "HelloWorld", your base directory will be renpy-6.10.1/HelloWorld.
The game directory is almost always a directory named "game" underneath the base directory. For example, if your base directory is renpy-6.10.1/HelloWorld, your game directory will be renpy-6.10.1/HelloWorld/game.
However, Ren'Py searches directories in the following order:
The launcher will only properly recognize the "game" and "data" directories, however.
The game directory contains all the files used by the game. It, including all subdirectories, is scanned for .rpy and .rpyc files, and those are combined to form the game script. It is scanned for .rpa archive files, and those are automatically used by the game. Finally, when the game gives a path to a file to load, it is loaded relative to the game directory. (But note that config.searchpath can change this.)
The following files and directories are not distributed with Ren'Py games, even if they are in the base directory.