Alright I finally got some screenshots to help explain the Favorites section.
First up: What I see when I first open up the Favorites window.
Without putting any notes into yet, you'll just see the first folder up there (1) called 'Notes' and that is the only default folder Carbonite uses. All the others are folders and folders within folders I have created. The 'Notes' section is where Carbonite puts and organizes all of your map notes that get add when you right click a point on the world map and click 'Add Note.' Carbonite creates a heading for the zone that you created the map note for to store all of the notes for that zone in (so all of those grey zone titles were created automatically). The difference with the 'Notes' folder versus other folders is that the map notes created here will always show up on your map without having to select it in your Favorites folder. (If you highlight a map note in this folder, it will pulse on your world map so you can pick it out easier.) Also, by default, Carbonite sets all notes to the star icon and that can be changed by right clicking the map note and hitting "Set Icon."
Ok, next set of folders here... I decided to make a section of all the dailies I do so I can remember which ones there are, where they start, what they reward, and so on. I started by right clicking on the 'Root' heading up there and clicked 'Add Folder.' This creates a folder, 'Dailies' (arrow 2), outside and separate from the 'Notes' folder.
Then you see you can make folders within folders (each of the zones for my dailies) by right clicking the target folder, or right clicking space underneath a folder and clicking 'Add Folder.' I've got the section for my 'Daily Dungeon's' highlighted which I made by right-clicking the 'Dailies' folder and clicking 'Add Favorite.' Once I click this, it shows the information for that Favorite on the right. To add comments (a.k.a. notes) about your favorite, right click on the right panel and click 'Add Comment.' This gives a line of text like what is highlighted next to the "--" marks and you can put whatever you want in there. I've added map notes to this Favorite that will only appear on my map when I have them highlighted. You add these by highlighting the Favorite where you want the map notes to go ('Daily Dungeon' for example) then hitting that 'Record' button in the top left corner which will make it glow red. Then go to your map and right click where you want the map note to point to and create a map note like we did before. This will put the note in your selected Favorite in the format shown above. Just make sure to click that 'Record' button again to stop it.
And finally, the last screenshot:
I made this Favorite for a daily quest, "Escape from Skettis," and put in my 'Dailies' folder, then in my 'Terokkar Forest' folder within the 'Dailies' folder. This Favorite shows a different kind of map note you can use - the "Target 1st:" items. These are a little bit trickier to make but are very handy. When you select one of the "Target 1st:" items, it creats a "Goto" point on your map and HUD to direct you to that point automatically. In this example, I plotted the possible start points to this quest so I click one, it makes the "GoTo" point and I head in that direction by following my HUD arrow. You can make these points like you did with Favorite-specific maps notes discussed above, by hitting the 'Record' button. I made them for this example by highlighting "Escape from Skettis" on the left, then hitting the record button, then typing in the possible spawn points with "/carb goto 68 74" which created the first "Target 1st:" up there. The last one up there, "Sky Sergeant Doryn [End]," is where I go to turn in the quest. I have these start and end points in most of my dailies and if they're a person and not a point, you have to make it a little differently. (And the 'Record' button definitely takes some getting used to so you'll just have to play with it.) To make the "Target 1st:" point to a quest giver, I had to finish the quest objectives so that it would read "Complete" in my quest log and when I track it in the quest watch, my HUD arrow points to the person where I turn in the quest. Then, I hit 'Record' for the specific Favorite I'm adding to, and then hit the button to track that quest back to the quest giver and Carbonite adds the location of that person to the Favorite as a "Target 1st:." (On a side note, the 'Up' and 'Down' buttons up there move what is selected either up or down to organize things.)
Well that's my run-down with the Favorites section of Carbonite. Let me know if you have any more questions about it it.