Any recursive algorithm can be made iterative and vise versa. It really depends on the algorithm if the function calls are a major factor in performance.

I'm exaggerating a bit there. This problem is fairly easy to implement iteratively (e.g. keep a list of unbrowsed folders and keep adding to it), but that is not the case for all problems. Some will be easier to solve in one way, though fundamentally solvable either way

Recursion is never more efficient than the best equivalent iterative solution. Recursion however allows you to solve some problems very easily and very neatly.

A naive iterative implementation would be by adding and removing the folders/files from a list.

If tail call optimization works on the (recursive) example then that's (kinda) the compiler turning a recursive function into a loop.

a whole entire loop? I'm partial to partial loops myself