You have a choice ...

You can use the default pattern of:
Code:
/images
/images/medium
/images/large
Or, if you like, you can make your own directories based on your image sorting needs and use subdirectories ... some need them some do not ... such as a custom pattern for:
Code:
/images/your_own_directory
/images/medium/your_own_directory
/images/large/your_own_directory
As long as you follow the pattern, either method works ...