Why special organization under real base directory? If we just create all real directories in one real base directory there could be performance penalty when there are large number of real directories to be created. File systems like ext2/ext3 are not optimized for this kind of flat directory structure.
It would be much better if real base directory is divided into more subdirectories or even dividing these subdirectories again into more subdirectories. And in the final subdirectories actual home directories are kept!
There are three types of directory organization.
Actually no organization. All home directories are created directly under real base directory.
Real base directory is divided into more subdirectories. These subdirectories names are derived from first letter of the final directory to be created. For example, if user1 directory is to be created, first a directory named 'u' is created under real base directory. Then in that subdirectory actual directory user1 created as /<real_base_directory>/u/user1.
Same as level 1 organization but after first level of subdirectories, second level subdirectories also created. Name for which is derived form starting two letters of the final directory to be created. For example, for user user1 as with the above example, /<real_base_directory>/u/us/user1 is created.