Here are typical layouts for the iTunes folders:
If you have upgraded from version 8 (or earlier) to iTunes 9 (or later) at some point, then your media folder (everything inside the red outline) may still be called iTunes Music instead of iTunes Media. The extra Music folder inside the media folder is used if you have allowed iTunes to Upgrade to iTunes Media Organization (iTunes 9) or used File > Library > Organize Library > Reorganize files in the folder "<Media Folder>" (iTunes 10). Depending on your choices for Keep iTunes Media folder organized and Copy files to iTunes Media folder when adding to library plus a little bug in which one build changed the name of the file storing the choice of layout it is quite easy for some of your files to be organized according to one layout and some the other.
Assuming you're happy letting iTunes organize your files the following steps should tidy things up (should it be necessary):
1. Select File > Library > Organize Library... > Tick Reorganize files in the folder "<Media Folder>" and click OK. Skip if this option is greyed out (already upgraded) or you prefer the older layout.
2. Select File > Library > Organize Library... > Tick Consolidate files and click OK. This will bring any files currently organised outside the designated media folder into it. NB This will create duplicate copies of any file that needs to be consolidated, and you will need to manually clean up afterwards. If space is at a premium try my scripts Unconsolidated to find out what would need moving and ConsolidatebyMoving to move rather than copy it.
3. Select Edit > Preferences > Advanced tab, uncheck Keep iTunes Media folder organized and click OK.
4. Select Edit > Preferences > Advanced tab, check Keep iTunes Media folder organized and click OK. This triggers iTunes into reorganizing everything according to your preferences.
5. (Optional) Close iTunes, rename the folder iTunes Music as iTunes Media then restart iTunes. Check under Edit > Preferences > Advanced tab that the location has automatically updated. If you can't access the media for any reason just undo the folder rename.
6. (Optional - Windows only) If Windows Media Player has ever had access to your files it may have liberally scattered folder artwork files about which iTunes won't tidy up when it reorganizes things, thus leaving behind a heap of folders with artwork and no media. I've written a script for cleaning this mess up called CleanDeadArt.
PS If you really prefer the older layout, but it is already in the new one then edit the file called .iTunes Preferences.plist in your media folder and change the integer from 1 to 0 before doing step 3.
tt2