The special Hidden tag [not folder] is to "hide" images from general view. If you apply this tag, it disappears. If you select this tag, it shows the hidden images.
It is unclear exactly what this was intended for, but I think it is used by most people as a "tentative delete" for images that they are planning to trash. What I do is review my pictures , applying the Hidden tag to any rejects. This is faster than doing a delete on each image. Later, I review the hidden images one last time before deleteing the lot.