Linux organizes its file in directories, where each directory can contain files or other directories.
There is one topmost directory which is called the root directory, and is labelled as /.
The . meta directory designated the current directory. ".." is the directory above it. If a / is prefixed at the beginning than the path would be absolute.
The cd command changes the current working directory to a different directory. The pwd command prints the path of the current working directory.
Here's an example session at the command line:
shlomi:~$ cd /usr
shlomi:/usr$ pwd
/usr
shlomi:/usr$ cd local/bin
shlomi:/usr/local/bin$ pwd
/usr/local/bin
shlomi:/usr/local/bin$ cd ../../share
shlomi:/usr/share$ pwd
/usr/share
shlomi:/usr/share$ cd /usr/share/doc/
shlomi:/usr/share/doc$ pwd
/usr/share/doc
shlomi:/usr/share/doc$ cd ./vim-X11-6.1/
shlomi:/usr/share/doc/vim-X11-6.1$ pwd
/usr/share/doc/vim-X11-6.1
shlomi:/usr/share/doc/vim-X11-6.1$ cd ..
shlomi:/usr/share/doc$ cd rsync-2.5.6/
shlomi:/usr/share/doc/rsync-2.5.6$ pwd
/usr/share/doc/rsync-2.5.6
shlomi:/usr/share/doc/rsync-2.5.6$