This is a VERY common virus which reproduces itself by making a copy of itself onto any folder it finds in the infected computer.
For the time being open task manager and navigate to Processes tab.
Now stop any process with names 'New Folder.exe', 'autorun.inf' or 'Recycler'.
If you can't find them or for a permanent solution,
Get a good free antivirus like AVG or ESET NOD 32 and try installing it using command prompt(Run in Administrator mode).
If that turns futile, try installing it and running a scan in safe mode. I bet the antivirus would detect these files - 'New Folder.exe', 'autorun.inf' and 'Recycler'.
In the mean time, if your folders get replaced by 'Folder Name.exe' files, don't panic, Your folders have simply been hidden.
To view hidden folders,
1) In Windows Explorer, choose Tools > Folder Options.
2) Click the View tab in the Folder Options dialog box.
3) In Advanced Settings, select Show Hidden Files And Folders.
4) Deselect Hide Extensions For Known File Types.
5) Click OK.
Now the folder will become visible. Right click on it --> Deselect Hidden checkbox and click apply.