From GotDotNet and Graham Tyler's blog:
What does it do?
The Windows Folder web part allows users to store files within a standard Windows (NTFS) folder in a shared network location and display a list of those files in a SharePoint page via a consistent ‘document library’-style interface.
This means that if your users need to work with file types that do not work well when stored within SharePoint, you can now continue to store them in NTFS, but users can locate them in SharePoint alongside the rest of their files that are stored within SharePoint, via a consistent interface. (Note that NTFS does not natively support all the SharePoint features such as check-in, check-out, version history etc so these options are not available for files accessed via the Windows Folder web part.)
The initial requirement for which I developed this solution was for a company which was migrating all user files from NTFS to SharePoint, but were heavy users of Microsoft Access, with hundreds of small databases stored in NTFS used for various adhoc custom purposes. They would often have multiple users reading and editing data from an Access database simultaneously. When accessed via RDP (i.e. over the local network), Access is capable of handling this type of 'simultaneous access' pretty seamlessly. However, if accessed via HTTP (such as if stored within SharePoint), due to the stateless nature of HTTP, each user perhaps unknowingly downloads a local copy of the database. Any editing they perform happens only on their local copy. If they even realise this, there is no easy way to synchronise their changes back to the version stored in SharePoint and resolve any conflicts. My solution - keep doing it the old way behind the scenes but pretend to store them in SharePoint 
. This way users still have a single place to go to find all their files.
I'm sure you can think of other scenarios where this could be useful. Note that even with this web part available, you should continue to store most file types within SharePoint to take advantage of check-in, check-out, version history and all the other benefits SharePoint adds over NTFS. Use this solution only when there is something blocking you from otherwise using SharePoint.
Sounds hard to manage?
This is the cool bit: When a SharePoint site administrator adds the Windows Folder web part to the site, a new NTFS sub-folder representing the site is automatically created underneath a 'root' NTFS shared folder (configured by the server administrator when first installing the web part). The NTFS security ACLs for each sub-folder are automatically synchronised to match the list of SharePoint users for the site, so the site administrator experience is simply to "drag and drop" the web part. New users added later to the SharePoint site will also be added to the NTFS folder next time the site admin visits the site.
Works best (most securely) if Kerberos authentication is used.
With thanks to
Remco for the screenshot
Download here or read Graham’s complete article here.