Hmm...what browser are you using? IE, Firefox, Mozilla?
Thanks in advance for the additional info.
Rachel The Computer Tutor
Follow up: I'm going to assume that you are using IE because you called it the Favorites folder and it's generally not referred to as that in other browsers.
-Ok, open your browser and go to the Tools menu and click Internet Options.
-Click on the Advanced tab.
-The first category you see is Accessibility and the next is Browsing.
-Under the Browsing category, look at the first option. You'll see a check box and beside it should read: Close unused folders in History and Favorites*
-Please make sure that the check box IS NOT CHECKED. This could be your problem.
Just as a side note, if you install the new Y! toolbar, it has a 'Bookmarks' feature that saves your sites. They're saved completely online through your Yahoo! account (much like Y! Photos, Y! Briefcase and Flickr) and are not saved in your Favorites folder on your computer.
I hope I've helped. Please let me know if I can be of more assistance to you.