This directory structure contains the settings and configuration files specific to your site or sites and is an integral part of multisite configuration.
The sites/all/ subdirectory structure should be used to place your custom and downloaded extensions including modules, themes, and third party libraries.
Downloaded installation profiles should be placed in the /profiles directory in the Drupal root.
In multisite configuration, extensions found in the sites/all directory structure are available to all sites. Alternatively, the sites/your_site_name/ subdirectory pattern may be used to restrict extensions to a specific site instance.
See the respective README.txt files in sites/all/themes and sites/all/modules for additional information about obtaining and organizing extensions.
See INSTALL.txt in the Drupal root for information about single-site installation or multisite configuration.