The Macintosh File System is the original disk format used by the first Macs ever introduced. It was a non-hierarchical FS, meaning that you couldn't nest folders within each other. In open and save dialogs, all the folders disappeared and you were presented with one huge list of all the files on your computer.
MFS was obsoleted with the introduction of HFS in System 3.0 in January 1986 which, as the name suggests, is a hierarchical filesystem whereby you can nest folders to an unlimited depth if you so desire.