Like everything in life... we're all different. My preference is
MUSIC (top level folder)
ARTIST (folder inside Music, with band name or individual artist)
ALBUM (folders inside Artist for each album, sometimes needs 2 for double album)
SONGS (inside each Album... each mp3... each file should start with Track Number to keep proper album order)
Then, oh the many other things that go along with this that you may not expect. Track Number should be 01, 02, 03, etc.... not 1, 2, 3. This is because some systems will sort them as 1, 10, 11, 2, 3... grouping the 1's together.
BAND/ARTIST... one friend of mine thinks he's a librarian or something... using Last Name, First Name. If you like that idea, go for it, but I hate it.

Along with that, he also keeps "The" such as, Beatles, The or Grateful Dead, The.... and again, I hate that. But you don't have to listen to me... it is strictly a personal preference. My preference is totally ignore "The" in any band. This would make the band, "The The" simply "The" in my collection.
I just read
@KGIII's above... and I get that Genre is a valid option. But for me, there are too many crossover bands and musicians. That is why I avoid it.
OTHER THINGS: Compilations, movie scores, comedy, spoken word, and others, I'm sure. These could fit nicely into a Genre category... either under Music, or a top level equal with Music. There's no perfect method. Just get some ideas, and give it your best shot. I will be hard enough to actually take on the job of moving all the files into the new organization that you create. I have about a TB of mp3s, and I've quite given up on ever making it match up with my ideals.
Also top-level with Music, you may want Books and Movies.
