Firstly, you can obviously use this set up for anything, but I use it for separating our Literature Units. Secondly there are really no rules you have to stick to, it's just something I came up with myself when trying to combine Lapbooking and Notebooking. Neither one suited our needs fully. Lapbooks are great but my son needed more flexibility. Notebooking is great but my son needed to be able to go back and add more over time so unless you have one notebook for every single theme unit you are doing (and have a huge warehouse to store them in) it wasn't practical for us to use books either. So I got a ring binder and a bunch of manilla folders and started to experiment.
What you need:
Ring Binder or Lever Arch Folder
Manilla Folders (same sizing as the folder)
Loose Leaf paper
PLEASE CLICK ON PHOTO TO ENLARGE IF YOU CANNOT READ THE INSTRUCTIONS
Given that everything within the manilla folder is hole punched, you can also take out an entire unit and use file fasteners or split pins through the holes to secure the unit together. They can then be filed away when you don't need them and you can keep using your folder.
If you have any questions about how to set up your ring binders like this, please leave me a comment below in the comments section and I will endeavour to help. Thanks!
PS. Literature Units shown in these photos can be bought from Erica at Confessions of a Homeschooler.