Permission Inheritance and Folders
By default, permissions set in a site are inherited by sub-sites and lists contained in that site, and items in a list inherit permissions from the parent list. By breaking this inheritance you can set different permissions on an object from its parent.
Folders in a list or document library are items that have a content type of ‘Folder’ or a content type that derives from the ‘Folder’ content type. Since they are items you can break the inheritance from the parent list or folder and set different permissions on that folder. To do this, select the Manage Permissions menu for the folder:
Then select Actions + Edit Permissions to break the inheritance and set permissions on the folder:
But what about items in a folder? Do they inherit permissions from the folder or from the list/document library?
The good news is that items inherit permissions from the folder in which they belong.
This means, for example, you can create a folder in a list or document library in which a user or group can add items or edit items, but still have read-only access to all other items in other folders.