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I have some trouble understanding the concept of workspaces in Eclipse, and how I should treat it differently from e.g. working sets or folders. Please enlighten me!
A workspace is a folder where your projects reside. Additionally it contains meta-data like saved perspectives, text editor preferences, etc. (all the stuff you find in Window -> Preferences). You can work with exactly one workspace per Eclipse instance at a time.
A working set is just a collection of projects within a workspace. For example, you can use working sets to group projects according to some criterion. This is useful when you have many projects.
So, essentially the workspace is the place where your projects reside physically and where your preferences are stored, and working sets are just logical project sets, i.e. views of the contents in the workspace.