I understand your concerns, and they are indeed valid. First off, I doubt that managing millions of files in a traditional hierarchical file system is fun either. You'd likely run into problems with making unique names, sharding folders, and categorizing files that logically belong in multiple places. I also have some worries that existing file systems (say NTFS or XFS) will behave or perform well with millions of files. I believe that implementing tags is a starting point for the problem of managing millions of files in a sensible way.

Speaking of thousand of pictures, what I really want is to dump all my photos into one folder. Right now, tools are ill-equipped to deal with large folders, so I am forced to manually create a new folder for every thousand or so items.