@Scott: The archive appears like an additional mailbox or a PST to the user.
1) Users can copy or move/drag and drop messages to the archive, use Inbox Rules to automatically move items to a folder in the archive and create the desired folder structure in the archive.
2) A http://technet.microsoft.com/en-us/library/dd979795.aspx#MM
default archive policy moves old items (default: 2 years, can be changed) to the archive. The same folder structure is created in the archive - for example, if a message is moved from the Sent Items folder in the user mailbox, a Sent Items folder is created
in the archive if it doesn't already exist. Similarly, other folders (including any custom folders) are created in the archive when messages are moved.
When using search in Outlook or Outlook Web App, both mailboxes - the primary and the archive - are searched.