Poor site structure inevitably leads to poor navigation. You need a distinct hierarchy with the Home page at the top, main sections below this, plus subsections below these if your site is large, and finally end pages with content. A few spur pages in the basement below these are OK too, as long as there aren't too many of them.
A classic mistake (yes, I've made it myself) is putting content pages in the root directory. It seems like a good idea for that peculiar one-off page that won't easily fit in any existing section, until that page gets really popular and you add half a dozen more on the same subject and suddenly you've got an entire section residing in root. Ooops. And you can't easily move it because by now that first page is already on the search engines and you don't want to mess them about or they'll start messing you about too.
You can hide the mistake by giving those pages a menu under the regular directory structure, but it's still likely to come back to haunt you. In any case your knowledgeable visitors will see it in your page URLs.
That's one of the usability penalties of bad site structure — meaningless URLs. Advanced users, especially those who repeatedly visit your site, read your URLs and build up a picture of your site structure, even if it's only a subconscious one. A good structure will help them to navigate. A bad structure is a missed opportunity.
The mistake also demonstrates another important aspect of structure — it must be able to accommodate change. Bad structures are rarely created at site launch, they're far more likely to develop over time as mistakes are made in response to change. When you add pages, think ahead and work out if you should add a new directory too, even just for one page.
Most sites opt for the shallowest hierarchical structure they can manage, mainly because it has advantages for search engine recognition. Often search engines will take more interest in root directory files and those in the first directory level below. They may ignore pages buried under layers of subdirectories, especially if they think they've already indexed enough pages given the modest importance of your site.
In terms of pure usability, a deeper structure may be preferable, and on massive sites it may be essential, but on medium-sized sites you can finish up with a conflict between the need for a shallow structure to get the best indexing, and a deeper structure to get the best usability. It's one of those rare (very rare) conflicts where usability possibly comes out on the losing side.
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