The basic elements of navigation are simple. Navigation is made up of Subsites and Pages.
How does it work visually?
Visually, global navigation or top navigation is persistent throughout your website. It is always located across the top of the page, just below the header and logo. Global navigation items are also referred to as primary navigation. On interior pages of a website, local navigation is provided on the top left of the page and reflects the pages located within the section you've selected. There are also Breadcrumb trails that are located just below the top navigation and are a series of links that describe where you are in the context of a website. The bread crumb trail traces your path back to the root or home page of the site.
For more detailed information on how the structure and levels work, see the Levels of Navigation section
How does it work from a structure standpoint?
In the back-end of your site, you can see this structure by going to the Site Actions menu and selecting Manage Content and Structure.
From the root of this site, it looks like this:
You can see all of your subsites and their libraries in this view from the root. Learn more about subsites and libraries in the Subsites and Pages section. You can also see a lot of other things in this view -- most of these are detailed back-end controls that are only used by administrators and developers. Please stay only within your subsites and pages.