Unfiled Public Reports is a place to stash reports that you are experimenting with and aren't sure where they should be stashed.  It's a temporary holding area until you decide what folder you ultimately think I report should live in.

My Personal Custom Reports and My Personal Dashboards are places to store reports that are for your use only.  This way you don't clutter up the folders shared with other users with reports you intend only for your own personal use.  No one else can access the reports or dashboards stored in your 'personal folders'