The "root folder" almost always means the main directory of your site (that goes for every site you might host). Let's say, you have a domain foo, and the "root folder" on your server is: /dir1/dir2/dir3/foo/, now that's where robots.txt belongs to. It sits right next to your main index.html (or whatever suffix you've got). That's it.
Oh, and beware of text editors, make your robots.txt file with Notepad or BBEdit (or maybe even use Pico to create the file on your server if it is some kind of Unix).
Another way to look at is that it's supposed to be at [example.com...] (where of course example.com is your domain). In fact, you can see other people's robots.txt files by looking at, say, [webmasterworld.com...]