You can make a disk image (the .dmg file) FROM a folder, but a disk image is NOT a folder. It is mountable volume (like if you connect a USB flash drive). When you double-click it, it mounts to your Mac's Desktop, like a hard drive or server volume.
When I now click on the folder, nothing happens.
If you are double-clicking on a folder icon, you are looking at the wrong thing. During the process to create the disk image, you should have been prompted where to save the .dmg file. Make sure you are double-clicking on that .dmg file, which is the disk image.