Teams

Teams are collections of people, content, and tools that center around different projects and jobs within an organization.  In Teams, team members can have conversations and share files, notes etc. all in one place. Teams are made up of Channels.

If you select Teams in the sidebar, it displays the channels for your Team.  You need to be a team owner to add members to the team.  Anyone on the team can add channels.

Channels

Channels are the conversations you have with your Team members, and allow you to keep your Team conversations organized by topic, department, or project.  A channel is where your work gets done, and can be dedicated to specific topics, projects ,etc. To learn how to add a channel to your team, please see this Microsoft support article.  
Note: You cannot create a sub-channel.

Each new channel created in a Team will create a new folder at the root of the Teams/Group's folder.  This is how Teams handles file sharing inside the channels.  By default, every team will have a 'General' channel and folder.

For additional information about Teams and Channels, please see this Microsoft Support Article.