The Folder Index plugin enhances file organization in Obsidian by enabling automatic index file generation for folders. It supports dynamic updates such as renaming index files when a folder is renamed and automatically linking files within a folder. The plugin also sorts files and headings alphabetically, providing a clear structure. Additionally, it modifies the Graph View to represent folder structures and their internal links, improving visualization. For advanced usage, it supports integration with the File Tree Alternative Plugin and allows users to manually include folder index content in any note via a block processor. This plugin transforms folders into functional notes, streamlining content organization and accessibility.